Sarbanes-Oxley Act of 2002/Title VI

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Sarbanes-Oxley Act of 2002
Title VI—Commission Resources and Authority

==TITLE VI—COMMISSION RESOURCES AND AUTHORITY==

SEC. 601. AUTHORIZATION OF APPROPRIATIONS.[edit]

Section 35 of the Securities Exchange Act of 1934 (15 U.S.C. 78kk) is amended to read as follows:
``SEC. 35. AUTHORIZATION OF APPROPRIATIONS.
``In addition to any other funds authorized to be appropriated to the Commission, there are authorized to be appropriated to carry out the functions, powers, and duties of the Commission, $776,000,000 for fiscal year 2003, of which—
``(1) $102,700,000 shall be available to fund additional compensation, including salaries and benefits, as authorized in the Investor and Capital Markets Fee Relief Act (Public Law 107-123; 115 Stat. 2390 et seq.);
``(2) $108,400,000 shall be available for information technology, security enhancements, and recovery and mitigation activities in light of the terrorist attacks of September 11, 2001; and
``(3) $98,000,000 shall be available to add not fewer than an additional 200 qualified professionals to provide enhanced oversight of auditors and audit services required by the Federal securities laws, and to improve Commission investigative and disciplinary efforts with respect to such auditors and services, as well as for additional professional support staff necessary to strengthen the programs of the Commission involving Full Disclosure and Prevention and Suppression of Fraud, risk management, industry technology review, compliance, inspections, examinations, market regulation, and investment management.´´.

SEC. 602. APPEARANCE AND PRACTICE BEFORE THE COMMISSION.[edit]

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 4B the following:
``SEC. 4C. APPEARANCE AND PRACTICE BEFORE THE COMMISSION.
``(a) AUTHORITY TO CENSURE— The Commission may censure any person, or deny, temporarily or permanently, to any person the privilege of appearing or practicing before the Commission in any way, if that person is found by the Commission, after notice and opportunity for hearing in the matter—
``(1) not to possess the requisite qualifications to represent others;
``(2) to be lacking in character or integrity, or to have engaged in unethical or improper professional conduct; or
``(3) to have willfully violated, or willfully aided and abetted the violation of, any provision of the securities laws or the rules and regulations issued thereunder.
``(b) DEFINITION— With respect to any registered public accounting firm or associated person, for purposes of this section, the term ``improper professional conduct´´ means—
``(1) intentional or knowing conduct, including reckless conduct, that results in a violation of applicable professional standards; and
``(2) negligent conduct in the form of—
``(A) a single instance of highly unreasonable conduct that results in a violation of applicable professional standards in circumstances in which the registered public accounting firm or associated person knows, or should know, that heightened scrutiny is warranted; or
``(B) repeated instances of unreasonable conduct, each resulting in a violation of applicable professional standards, that indicate a lack of competence to practice before the Commission.´´.

SEC. 603. FEDERAL COURT AUTHORITY TO IMPOSE PENNY STOCK BARS.[edit]

(a) SECURITIES EXCHANGE ACT OF 1934—
Section 21(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)), as amended by this Act, is amended by adding at the end the following:
``(6) AUTHORITY OF A COURT TO PROHIBIT PERSONS FROM PARTICIPATING IN AN OFFERING OF PENNY STOCK—
``(A) IN GENERAL— In any proceeding under paragraph (1) against any person participating in, or, at the time of the alleged misconduct who was participating in, an offering of penny stock, the court may prohibit that person from participating in an offering of penny stock, conditionally or unconditionally, and permanently or for such period of time as the court shall determine.
``(B) DEFINITION— For purposes of this paragraph, the term ``person participating in an offering of penny stock´´ includes any person engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of, any penny stock. The Commission may, by rule or regulation, define such term to include other activities, and may, by rule, regulation, or order, exempt any person or class of persons, in whole or in part, conditionally or unconditionally, from inclusion in such term.´´.
(b) SECURITIES ACT OF 1933—
Section 20 of the Securities Act of 1933 (15 U.S.C. 77t) is amended by adding at the end the following:
``(g) AUTHORITY OF A COURT TO PROHIBIT PERSONS FROM PARTICIPATING IN AN OFFERING OF PENNY STOCK—
``(1) IN GENERAL— In any proceeding under subsection (a) against any person participating in, or, at the time of the alleged misconduct, who was participating in, an offering of penny stock, the court may prohibit that person from participating in an offering of penny stock, conditionally or unconditionally, and permanently or for such period of time as the court shall determine.
``(2) DEFINITION— For purposes of this subsection, the term ``person participating in an offering of penny stock´´ includes any person engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of, any penny stock. The Commission may, by rule or regulation, define such term to include other activities, and may, by rule, regulation, or order, exempt any person or class of persons, in whole or in part, conditionally or unconditionally, from inclusion in such term.´´.

SEC. 604. QUALIFICATIONS OF ASSOCIATED PERSONS OF BROKERS AND DEALERS.[edit]

(a) BROKERS AND DEALERS—
Section 15(b)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended—
(1) by striking subparagraph (F) and inserting the following:
``(F) is subject to any order of the Commission barring or suspending the right of the person to be associated with a broker or dealer;´´; and
(2) in subparagraph (G), by striking the period at the end and inserting the following: ``; or
``(H) is subject to any final order of a State securities commission (or any agency or officer performing like functions), State authority that supervises or examines banks, savings associations, or credit unions, State insurance commission (or any agency or office performing like functions), an appropriate Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))), or the National Credit Union Administration, that—
``(i) bars such person from association with an entity regulated by such commission, authority, agency, or officer, or from engaging in the business of securities, insurance, banking, savings association activities, or credit union activities; or
``(ii) constitutes a final order based on violations of any laws or regulations that prohibit fraudulent, manipulative, or deceptive conduct.´´.
(b) INVESTMENT ADVISERS—
Section 203(e) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(e)) is amended—
(1) by striking paragraph (7) and inserting the following:
``(7) is subject to any order of the Commission barring or suspending the right of the person to be associated with an investment adviser;´´;
(2) in paragraph (8), by striking the period at the end and inserting ``; or´´; and
(3) by adding at the end the following:
``(9) is subject to any final order of a State securities commission (or any agency or officer performing like functions), State authority that supervises or examines banks, savings associations, or credit unions, State insurance commission (or any agency or office performing like functions), an appropriate Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(q))), or the National Credit Union Administration, that—
``(A) bars such person from association with an entity regulated by such commission, authority, agency, or officer, or from engaging in the business of securities, insurance, banking, savings association activities, or credit union activities; or
``(B) constitutes a final order based on violations of any laws or regulations that prohibit fraudulent, manipulative, or deceptive conduct.´´.
(c) CONFORMING AMENDMENTS—
(1) SECURITIES EXCHANGE ACT OF 1934—
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended—
(A) in section 3(a)(39)(F) (15 U.S.C. 78c(a)(39)(F))—
(i) by striking ``or (G)´´ and inserting ``(H), or (G)´´; and
(ii) by inserting ``, or is subject to an order or finding,´´ before ``enumerated´´;
(B) in each of section 15(b)(6)(A)(i) (15 U.S.C. 78o(b)(6)(A)(i)), paragraphs (2) and (4) of section 15B(c) (15 U.S.C. 78o-4(c)), and subparagraphs (A) and (C) of section 15C(c)(1) (15 U.S.C. 78o-5(c)(1))—
(i) by striking ``or (G)´´ each place that term appears and inserting ``(H), or (G)´´; and
(ii) by striking ``or omission´´ each place that term appears, and inserting ``, or is subject to an order or finding,´´; and
(C) in each of paragraphs (3)(A) and (4)(C) of section 17A(c) (15 U.S.C. 78q-1(c))—
(i) by striking ``or (G)´´ each place that term appears and inserting ``(H), or (G)´´; and
(ii) by inserting ``, or is subject to an order or finding,´´ before ``enumerated´´ each place that term appears.
(2) INVESTMENT ADVISERS ACT OF 1940—
Section 203(f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(f)) is amended—
(A) by striking ``or (8)´´ and inserting ``(8), or (9)´´; and
(B) by inserting ``or (3)´´ after ``paragraph (2)´´.