Sarbanes Oxley Act Section 105

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;

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.

(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

(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

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;

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

(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

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

(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.

Return to Index

Our Web Sites

Become a Certified Sarbanes-Oxley Expert (CSOE)

Visit www.sarbanes-oxley-association.com/Distance_Learning_and_Certification.htm

Certified Sarbanes-Oxley Expert (CSOE) - Distance learning and online certification program