Sarbanes Oxley Act Section 105

 

SEC. 105. INVESTIGATIONS AND DISCIPLINARY PROCEEDINGS.
 
(a) IN GENERAL.—The Board shall establish, by rule, subject
to the requirements of this section, fair procedures for the investigation
and disciplining of registered public accounting firms and associated
persons of such firms.
 
(b) INVESTIGATIONS.—
(1) AUTHORITY.—
In accordance with the rules of the Board,
the Board may conduct an investigation of any act or practice,
or omission to act, by a registered public accounting firm,
any associated person of such firm, or both, that may violate
any provision of this Act, the rules of the Board, the provisions
of the securities laws relating to the preparation and issuance
of audit reports and the obligations and liabilities of accountants
with respect thereto, including the rules of the Commission
issued under this Act, or professional standards, regardless
of how the act, practice, or omission is brought to the attention
of the Board.
 
(2) TESTIMONY AND DOCUMENT PRODUCTION.—In addition
to such other actions as the Board determines to be necessary
or appropriate, the rules of the Board may—
 
(A) require the testimony of the firm or of any person
associated with a registered public accounting firm, with
respect to any matter that the Board considers relevant
or material to an investigation;
 
(B) require the production of audit work papers and
any other document or information in the possession of
a registered public accounting firm or any associated person
thereof, wherever domiciled, that the Board considers relevant
or material to the investigation, and may inspect
the books and records of such firm or associated person
to verify the accuracy of any documents or information
supplied;
 
(C) request the testimony of, and production of any
document in the possession of, any other person, including
any client of a registered public accounting firm that the
Board considers relevant or material to an investigation
under this section, with appropriate notice, subject to the
needs of the investigation, as permitted under the rules
of the Board; and
 
(D) provide for procedures to seek issuance by the
Commission, in a manner established by the Commission,
of a subpoena to require the testimony of, and production
of any document in the possession of, any person, including
any client of a registered public accounting firm, that the
Board considers relevant or material to an investigation
under this section.
 
(3) NONCOOPERATION WITH INVESTIGATIONS.—
 
(A) IN GENERAL.—If a registered public accounting firm
or any associated person thereof refuses to testify, produce
documents, or otherwise cooperate with the Board in
connection with an investigation under this section, the
Board may—
 
(i) suspend or bar such person from being associated
with a registered public accounting firm, or
require the registered public accounting firm to end
such association;
 
(ii) suspend or revoke the registration of the public
accounting firm; and
 
(iii) invoke such other lesser sanctions as the Board
considers appropriate, and as specified by rule of the
Board.
 
(B) PROCEDURE.—Any action taken by the Board under
this paragraph shall be subject to the terms of section
107(c).
 
(4) COORDINATION AND REFERRAL OF INVESTIGATIONS.—
 
(A) COORDINATION.—The Board shall notify the
Commission of any pending Board investigation involving
a potential violation of the securities laws, and thereafter
coordinate its work with the work of the Commission’s
Division of Enforcement, as necessary to protect an ongoing
Commission investigation.
 
(B) REFERRAL.—The Board may refer an investigation
under this section—
 
(i) to the Commission;
 
(ii) to any other Federal functional regulator (as
defined in section 509 of the Gramm-Leach-Bliley Act
(15 U.S.C. 6809)), in the case of an investigation that
concerns an audit report for an institution that is
subject to the jurisdiction of such regulator; and
 
(iii) at the direction of the Commission, to—
(I) the Attorney General of the United States;
(II) the attorney general of 1 or more States;
and
(III) the appropriate State regulatory authority.
 
(5) USE OF DOCUMENTS.—
 
(A) CONFIDENTIALITY.—Except as provided in subparagraph
(B), all documents and information prepared or
received by or specifically for the Board, and deliberations
of the Board and its employees and agents, in connection
with an inspection under section 104 or with an investigation
under this section, shall be confidential and privileged
as an evidentiary matter (and shall not be subject to civil
discovery or other legal process) in any proceeding in any
Federal or State court or administrative agency, and shall
be exempt from disclosure, in the hands of an agency
or establishment of the Federal Government, under the
Freedom of Information Act (5 U.S.C. 552a), or otherwise,
unless and until presented in connection with a public
proceeding or released in accordance with subsection (c).
 
(B) AVAILABILITY TO GOVERNMENT AGENCIES.—
Without the loss of its status as confidential and privileged in
the hands of the Board, all information referred to in
subparagraph (A) may—
 
(i) be made available to the Commission; and
 
(ii) in the discretion of the Board, when determined
by the Board to be necessary to accomplish the purposes
of this Act or to protect investors, be made available to—
 
(I) the Attorney General of the United States;
 
(II) the appropriate Federal functional regulator
(as defined in section 509 of the Gramm-
Leach-Bliley Act (15 U.S.C. 6809)), other than the
Commission, with respect to an audit report for
an institution subject to the jurisdiction of such
regulator;
 
(III) State attorneys general in connection with
any criminal investigation; and
 
(IV) any appropriate State regulatory
authority, each of which shall maintain such information as confidential
and privileged.
 
(6) IMMUNITY.—Any employee of the Board engaged in
carrying out an investigation under this Act shall be immune
from any civil liability arising out of such investigation in
the same manner and to the same extent as an employee
of the Federal Government in similar circumstances.
 
(c) DISCIPLINARY PROCEDURES.—
 
(1) NOTIFICATION; RECORDKEEPING.—The rules of the Board
shall provide that in any proceeding by the Board to determine
whether a registered public accounting firm, or an associated
person thereof, should be disciplined, the Board shall—
 
(A) bring specific charges with respect to the firm
or associated person;
 
(B) notify such firm or associated person of, and provide
to the firm or associated person an opportunity to defend
against, such charges; and
 
(C) keep a record of the proceedings.
 
(2) PUBLIC HEARINGS.—Hearings under this section shall
not be public, unless otherwise ordered by the Board for good
cause shown, with the consent of the parties to such hearing.
 
(3) SUPPORTING STATEMENT.—A determination by the Board
to impose a sanction under this subsection shall be supported
by a statement setting forth—
 
(A) each act or practice in which the registered public
accounting firm, or associated person, has engaged (or
omitted to engage), or that forms a basis for all or a
part of such sanction;
 
(B) the specific provision of this Act, the securities
laws, the rules of the Board, or professional standards
which the Board determines has been violated; and
 
(C) the sanction imposed, including a justification for
that sanction.
 
(4) SANCTIONS.—If the Board finds, based on all of the
facts and circumstances, that a registered public accounting
firm or associated person thereof has engaged in any act or
practice, or omitted to act, in violation of this Act, the rules
of the Board, the provisions of the securities laws relating
to the preparation and issuance of audit reports and the obligations
and liabilities of accountants with respect thereto,
including the rules of the Commission issued under this Act,
or professional standards, the Board may impose such disciplinary
or remedial sanctions as it determines appropriate, subject
to applicable limitations under paragraph (5), including—
 
(A) temporary suspension or permanent revocation of
registration under this title;
 
(B) temporary or permanent suspension or bar of a
person from further association with any registered public
accounting firm;
 
(C) temporary or permanent limitation on the activities,
functions, or operations of such firm or person (other
than in connection with required additional professional
education or training);
 
(D) a civil money penalty for each such violation, in
an amount equal to—
 
(i) not more than $100,000 for a natural person
or $2,000,000 for any other person; and
 
(ii) in any case to which paragraph (5) applies,
not more than $750,000 for a natural person or
$15,000,000 for any other person;
 
(E) censure;
 
(F) required additional professional education or
training; or
 
(G) any other appropriate sanction provided for in the
rules of the Board.
 
 
(5) INTENTIONAL OR OTHER KNOWING CONDUCT.—
 
The sanctions and penalties described in subparagraphs (A) through
(C) and (D)(ii) of paragraph (4) shall only apply to—
 
(A) intentional or knowing conduct, including reckless
conduct, that results in violation of the applicable statutory,
regulatory, or professional standard; or
 
(B) repeated instances of negligent conduct, each
resulting in a violation of the applicable statutory, regulatory,
or professional standard.
 
(6) FAILURE TO SUPERVISE.—
 
(A) IN GENERAL.—The Board may impose sanctions
under this section on a registered accounting firm or upon
the supervisory personnel of such firm, if the Board finds
that—
 
(i) the firm has failed reasonably to supervise an
associated person, either as required by the rules of
the Board relating to auditing or quality control standards,
or otherwise, with a view to preventing violations
of this Act, the rules of the Board, the provisions
of the securities laws relating to the preparation and
issuance of audit reports and the obligations and liabilities
of accountants with respect thereto, including the
rules of the Commission under this Act, or professional
standards; and
 
(ii) such associated person commits a violation of
this Act, or any of such rules, laws, or standards.
 
(B) RULE OF CONSTRUCTION.—No associated person of
a registered public accounting firm shall be deemed to
have failed reasonably to supervise any other person for
purposes of subparagraph (A), if—
 
(i) there have been established in and for that
firm procedures, and a system for applying such procedures,
that comply with applicable rules of the Board
and that would reasonably be expected to prevent and
detect any such violation by such associated person; and
 
(ii) such person has reasonably discharged the
duties and obligations incumbent upon that person
by reason of such procedures and system, and had
no reasonable cause to believe that such procedures
and system were not being complied with.
 
(7) EFFECT OF SUSPENSION.—
 
(A) ASSOCIATION WITH A PUBLIC ACCOUNTING FIRM.—
It shall be unlawful for any person that is suspended
or barred from being associated with a registered public
accounting firm under this subsection willfully to become
or remain associated with any registered public accounting
firm, or for any registered public accounting firm that
knew, or, in the exercise of reasonable care should have
known, of the suspension or bar, to permit such an association,
without the consent of the Board or the Commission.
 
(B) ASSOCIATION WITH AN ISSUER.—It shall be unlawful
for any person that is suspended or barred from being
associated with an issuer under this subsection willfully
to become or remain associated with any issuer in an
accountancy or a financial management capacity, and for
any issuer that knew, or in the exercise of reasonable
care should have known, of such suspension or bar, to
permit such an association, without the consent of the
Board or the Commission.
 
(d) REPORTING OF SANCTIONS.—
 
(1) RECIPIENTS.—If the Board imposes a disciplinary sanction,
in accordance with this section, the Board shall report
the sanction to—
 
(A) the Commission;
 
(B) any appropriate State regulatory authority or any
foreign accountancy licensing board with which such firm
or person is licensed or certified; and
 
(C) the public (once any stay on the imposition of
such sanction has been lifted).
 
(2) CONTENTS.—The information reported under paragraph
 
(1) shall include—
 
(A) the name of the sanctioned person;
 
(B) a description of the sanction and the basis for
its imposition; and
 
(C) such other information as the Board deems appropriate.
 
(e) STAY OF SANCTIONS.—
(1) IN GENERAL.—Application to the Commission for review,
or the institution by the Commission of review, of any disciplinary
action of the Board shall operate as a stay of any such
disciplinary action, unless and until the Commission orders
(summarily or after notice and opportunity for hearing on the
question of a stay, which hearing may consist solely of the
submission of affidavits or presentation of oral arguments) that
no such stay shall continue to operate.
 
(2) EXPEDITED PROCEDURES.—
The Commission shall establish
for appropriate cases an expedited procedure for consideration and determination of the question of the duration of
a stay pending review of any disciplinary action of the Board
under this subsection. 

 
   

 

 

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