Notice2023-06961
Public Company Accounting Oversight Board; Notice of Filing of Proposed Rules on Amendments to Board Rule Governing Determinations Under the Holding Foreign Companies Accountable Act
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 4, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 88 Issue 64 (Tuesday, April 4, 2023)</title>
</head>
<body><pre>
[Federal Register Volume 88, Number 64 (Tuesday, April 4, 2023)]
[Notices]
[Pages 20002-20004]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-06961]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97223; File No. PCAOB-2023-01]
Public Company Accounting Oversight Board; Notice of Filing of
Proposed Rules on Amendments to Board Rule Governing Determinations
Under the Holding Foreign Companies Accountable Act
March 30, 2023.
Pursuant to Section 107(b) of the Sarbanes-Oxley Act of 2002
(``Sarbanes-Oxley'' or the ``Act''), notice is hereby given that on
March 29, 2023, the Public Company Accounting Oversight Board (the
``Board'' or the ``PCAOB'') filed with the Securities and Exchange
Commission (the ``Commission'' or the ``SEC'') the proposed rules
described in items I and II below, which items have been prepared by
the Board. The Commission is publishing this notice to solicit comments
on the proposed rules from interested persons.
I. Board's Statement of the Terms of Substance of the Proposed Rules
On March 28, 2023, the Board adopted amendments to PCAOB Rule 6100,
Board Determinations Under the Holding Foreign Companies Accountable
Act (collectively, the ``proposed rules''). The text of the proposed
rules appears in Exhibit A to the SEC Filing Form 19b-4 and is
available on the Board's website at <a href="https://pcaobus.org/about/rules-rulemaking/rulemaking-dockets/docket-050">https://pcaobus.org/about/rules-rulemaking/rulemaking-dockets/docket-050</a> and at the Commission's Public
Reference Room.
II. Board's Statement of the Purpose of, and Statutory Basis for, the
Proposed Rules
In its filing with the Commission, the Board included statements
concerning the purpose of, and basis for, the proposed rules. The text
of these statements may be examined at the places specified in Item IV
below. The Board has prepared summaries, set forth
[[Page 20003]]
in sections A, B, and C below, of the most significant aspects of such
statements.
A. Board's Statement of the Purpose of, and Statutory Basis for, the
Proposed Rules
(a) Purpose
Sarbanes-Oxley mandates that the Board inspect registered public
accounting firms and investigate possible statutory, rule, and
professional standards violations committed by those firms and their
associated persons. That mandate applies with equal force to the
Board's oversight of registered firms in the United States and in
foreign jurisdictions.\1\
---------------------------------------------------------------------------
\1\ See, e.g., Section 106(a)(1) of Sarbanes-Oxley, 15 U.S.C.
7216(a)(1).
---------------------------------------------------------------------------
In December 2020, recognizing the obstacles the Board has faced
when attempting to conduct inspections and investigations in certain
foreign jurisdictions, Congress enacted the Holding Foreign Companies
Accountable Act (``HFCAA''), which amended Sarbanes-Oxley.\2\ The HFCAA
required that the Board determine whether it is unable to inspect or
investigate completely registered public accounting firms located in a
foreign jurisdiction because of a position taken by one or more
authorities in that jurisdiction.\3\ The HFCAA also mandates that,
after the Board makes such a determination, the Commission shall
require covered issuers \4\ that retain such firms to make certain
disclosures in their annual reports and, eventually, if certain
conditions persist, shall prohibit trading in those issuers'
securities.\5\
---------------------------------------------------------------------------
\2\ Public Law 116-222, 134 Stat. 1063 (Dec. 18, 2020).
\3\ See Section 104(i)(2)(A) of Sarbanes-Oxley, 15 U.S.C.
7214(i)(2)(A).
\4\ See Section 104(i)(1)(A) of Sarbanes-Oxley, 15 U.S.C.
7214(i)(1)(A) (defining ``covered issuer'').
\5\ See generally Holding Foreign Companies Accountable Act
Disclosure, SEC Release No. 34-93701 (Dec. 2, 2021).
---------------------------------------------------------------------------
Following public comment, the Board adopted PCAOB Rule 6100, Board
Determinations Under the Holding Foreign Companies Accountable Act, to
establish a framework for the Board to make its determinations under
the HFCAA.\6\ Rule 6100 establishes the manner of the Board's
determinations; the factors the Board will evaluate and the documents
and information it will consider when assessing whether a determination
is warranted; the form, public availability, effective date, and
duration of such determinations; and the process by which the Board
will reaffirm, modify, or vacate any such determinations.
---------------------------------------------------------------------------
\6\ See Rule Governing Board Determinations Under the Holding
Foreign Companies Accountable Act, PCAOB Rel. No. 2021-004 (Sept.
22, 2021); see also Public Company Accounting Oversight Board; Order
Granting Approval of Proposed Rule Governing Board Determinations
Under the Holding Foreign Companies Accountable Act, SEC Release No.
34-93527 (Nov. 4, 2021).
---------------------------------------------------------------------------
On December 29, 2022, the President signed into law the
Consolidated Appropriations Act, 2023 (``the 2023 Appropriations
Act''),\7\ amending certain provisions of Sarbanes-Oxley that relate to
Board determinations under the HFCAA. As a result, the Board is
amending Rule 6100 to conform to the 2023 Appropriations Act's
amendment of Section 104(i)(2)(A)(ii) of Sarbanes-Oxley.\8\
---------------------------------------------------------------------------
\7\ See Public Law 117-328 (Dec. 29, 2022).
\8\ The other amendments to Sarbanes-Oxley in the 2023
Appropriations Act relate to the timetable for trading prohibitions.
See Section 301 of Division AA of the 2023 Appropriations Act
(reducing, from three years to two years, the timetable for trading
prohibitions set forth in Section 104(i)(3) of Sarbanes-Oxley).
Because Rule 6100 does not address the timetable for such
prohibitions, no related changes to Rule 6100 are necessary.
---------------------------------------------------------------------------
Amendments to Rule 6100(a). Consistent with the HFCAA,\9\ Rule
6100(a), as originally adopted, provided that a Board determination
regarding its inability to inspect or investigate completely a
registered public accounting firm could be based only on positions
taken by authorities in the foreign jurisdiction where the firm was
headquartered (for purposes of Rule 6100(a)(1)) or in a foreign
jurisdiction where the firm had an office (for purposes of Rule
6100(a)(2)).\10\ Therefore, if the Board were unable to inspect or
investigate a firm completely because of a position taken by an
authority in a foreign jurisdiction where the firm neither was
headquartered nor had an office, a determination under the HFCAA as to
the firm could not be made.
---------------------------------------------------------------------------
\9\ See HFCAA Sec. 2(i)(2)(A)(ii), 15 U.S.C. 7214(i)(2)(A)(ii)
(providing that a Board determination as to a registered firm can be
based only on a position taken by an authority in ``the foreign
jurisdiction described in clause (i),'' that is, the foreign
jurisdiction where a branch or office of the firm is located).
\10\ See PCAOB Rule 6100(a)(1) (pre-amendment) (``The Board may
determine that it is unable to inspect or investigate completely
registered public accounting firms headquartered in a foreign
jurisdiction because of a position taken by one or more authorities
in that jurisdiction.'') (emphasis added); PCAOB Rule 6100(a)(2)
(pre-amendment) (``The Board may determine that it is unable to
inspect or investigate completely a registered public accounting
firm that has an office that is located in a foreign jurisdiction
because of a position taken by one or more authorities in that
jurisdiction.'') (emphasis added).
---------------------------------------------------------------------------
The 2023 Appropriations Act amends Section 104(i)(2)(A)(ii) of
Sarbanes-Oxley to allow the Board to make a determination as to a firm
located in one foreign jurisdiction based on a position taken by an
authority in a different foreign jurisdiction.\11\ The Board is
amending Rule 6100(a)(1) and (a)(2) to effectuate that change by
replacing ``in that jurisdiction'' with ``in a foreign jurisdiction''
at the end of both provisions.
---------------------------------------------------------------------------
\11\ See Section 301 of Division AA of the 2023 Appropriations
Act (striking ``the foreign jurisdiction described in clause (i)''
and inserting ``a foreign jurisdiction'' in Section 104(i)(2)(A)(ii)
of Sarbanes-Oxley).
---------------------------------------------------------------------------
Amendments to Rule 6100(c) and (d). Relatedly, because future Board
determinations could implicate two foreign jurisdictions--one where the
firm is located and another whose authorities are taking positions that
render the Board unable to inspect or investigate completely--the Board
is amending Rule 6100(c) and (d) to eliminate potentially ambiguous or
confusing references to ``the foreign jurisdiction.'' Specifically, the
Board is deleting ``in the foreign jurisdiction or any political
subdivision thereof'' in Rule 6100(c)(1); is replacing ``any relevant
authority in the foreign jurisdiction'' with ``any relevant foreign
authority'' in Rule 6100(c)(2); is replacing ``the foreign
authority's'' with ``any relevant foreign authority's'' in Rule
6100(c)(3); and is deleting ``located in the foreign jurisdiction'' in
Rule 6100(d).
Effective Date. The Board determined that the amendments to Rule
6100 take effect upon approval by the Commission. The effective date
takes into consideration the statutory amendments to Sarbanes-Oxley and
the limited, conforming nature of the changes to Rule 6100.
(b) Statutory Basis
The statutory basis for the proposed rules is Title I of the Act.
B. Board's Statement on Burden on Competition
Not applicable. The amendments to Rule 6100 reflect the statutory
amendment to Section 104(i)(2)(A)(ii) of Sarbanes-Oxley.
C. Board's Statement on Comments on the Proposed Rules Received From
Members, Participants or Others
The Board did not solicit written comments on the proposed rules.
The amendments to Rule 6100 reflect the statutory amendment to Section
104(i)(2)(A)(ii) of Sarbanes-Oxley.\12\
---------------------------------------------------------------------------
\12\ The amendments to Rule 6100 do not require ``mandatory
audit firm rotation or a supplement to the auditor's report in which
the auditor would be required to provide additional information
about the audit and the financial statements'' of issuers, nor do
they impose any ``additional requirements'' on auditors. Section
103(a)(3)(C) of Sarbanes-Oxley. Accordingly, the Board has concluded
that Section 103(a)(3)(C) of Sarbanes-Oxley does not apply to this
rulemaking.
---------------------------------------------------------------------------
[[Page 20004]]
III. Date of Effectiveness of the Proposed Rules and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Board consents, the Commission will:
(A) by order approve or disapprove such proposed rules; or
(B) institute proceedings to determine whether the proposed rules
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed
rules are consistent with the requirements of Title I of the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/pcaob.shtml">http://www.sec.gov/rules/pcaob.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#5d2f283138703e3230303833292e1d2e383e733a322b"><span class="__cf_email__" data-cfemail="0b797e676e26686466666e657f784b786e68256c647d">[email protected]</span></a>. Please include
PCAOB-2023-01 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Vanessa Countryman,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to PCAOB-2023-01. This file number should
be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (<a href="http://www.sec.gov/rules/pcaob.shtml">http://www.sec.gov/rules/pcaob.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rules that are filed with the
Commission, and all written communications relating to the proposed
rules between the Commission and any person, other than those that may
be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for website viewing and printing in the
Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549-1090, on official business days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of such filing will also be available for
inspection and copying at the principal office of the PCAOB. All
comments received will be posted without charge; we do not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to PCAOB-2023-01 and should be submitted on or
before April 25, 2023.
For the Commission by the Office of the Chief Accountant.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-11(b)(1) and (3).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-06961 Filed 4-3-23; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on April 4, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.