Holding Foreign Companies Accountable Act 2020

134 STAT. 1063 PUBLIC LAW 116–222—DEC. 18, 2020
Public Law 116–222
116th Congress
An Act
To amend the Sarbanes-Oxley Act of 2002 to require certain issuers to disclose
to the Securities and Exchange Commission information regarding foreign jurisdic-tions that prevent the Public Company Accounting Oversight Board from per-forming inspections under that Act, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Holding Foreign Companies
Accountable Act’’.
SEC. 2. DISCLOSURE REQUIREMENT.
Section 104 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214)
is amended by adding at the end the following:
‘‘(i) D ISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PRE-
VENT INSPECTIONS .—
‘‘(1) D EFINITIONS .—In this subsection—
‘‘(A) the term ‘covered issuer’ means an issuer that
is required to file reports under section 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)); and
‘‘(B) the term ‘non-inspection year’ means, with respect
to a covered issuer, a year—
‘‘(i) during which the Commission identifies the
covered issuer under paragraph (2)(A) with respect to every report described in subparagraph (A) filed by the covered issuer during that year; and
‘‘(ii) that begins after the date of enactment of
this subsection.
‘‘(2) D
ISCLOSURE TO COMMISSION .—The Commission shall—
‘‘(A) identify each covered issuer that, with respect
to the preparation of the audit report on the financial statement of the covered issuer that is included in a report described in paragraph (1)(A) filed by the covered issuer, retains a registered public accounting firm that has a branch or office that—
‘‘(i) is located in a foreign jurisdiction; and ‘‘(ii) the Board is unable to inspect or investigate
completely because of a position taken by an authority in the foreign jurisdiction described in clause (i), as determined by the Board; and ‘‘(B) require each covered issuer identified under
subparagraph (A) to, in accordance with the rules issued by the Commission under paragraph (4), submit to the
Records. 15 USC 7201
note. Holding Foreign
Companies Accountable Act. Dec. 18, 2020
[S. 945]
VerDate Sep 11 2014 11:07 Dec 23, 2020 Jkt 019139 PO 00222 Frm 00001 Fmt 6580 Sfmt 6581 E:PUBLAWPUBL222.116 PUBL222wwoods2 on LAPJF8D0R2PROD with PUBLAW134 STAT. 1064 PUBLIC LAW 116–222—DEC. 18, 2020
Commission documentation that establishes that the cov-
ered issuer is not owned or controlled by a governmental entity in the foreign jurisdiction described in subparagraph (A)(i). ‘‘(3) T
RADING PROHIBITION AFTER 3 YEARS OF NON -INSPEC –
TIONS .—
‘‘(A) I N GENERAL .—If the Commission determines that
a covered issuer has 3 consecutive non-inspection years, the Commission shall prohibit the securities of the covered issuer from being traded—
‘‘(i) on a national securities exchange; or ‘‘(ii) through any other method that is within the
jurisdiction of the Commission to regulate, including through the method of trading that is commonly referred to as the ‘over-the-counter’ trading of securi-ties. ‘‘(B) R
EMOVAL OF INITIAL PROHIBITION .—If, after the
Commission imposes a prohibition on a covered issuer under subparagraph (A), the covered issuer certifies to the Commission that the covered issuer has retained a registered public accounting firm that the Board has inspected under this section to the satisfaction of the Commission, the Commission shall end that prohibition.
‘‘(C) R
ECURRENCE OF NON -INSPECTION YEARS .—If, after
the Commission ends a prohibition under subparagraph (B) or (D) with respect to a covered issuer, the Commission determines that the covered issuer has a non-inspection year, the Commission shall prohibit the securities of the covered issuer from being traded—
‘‘(i) on a national securities exchange; or ‘‘(ii) through any other method that is within the
jurisdiction of the Commission to regulate, including through the method of trading that is commonly referred to as the ‘over-the-counter’ trading of securi-ties. ‘‘(D) R
EMOVAL OF SUBSEQUENT PROHIBITION .—If, after
the end of the 5-year period beginning on the date on which the Commission imposes a prohibition on a covered issuer under subparagraph (C), the covered issuer certifies to the Commission that the covered issuer will retain a registered public accounting firm that the Board is able to inspect under this section, the Commission shall end that prohibition. ‘‘(4) R
ULES .—Not later than 90 days after the date of enact-
ment of this subsection, the Commission shall issue rules that establish the manner and form in which a covered issuer shall make a submission required under paragraph (2)(B).’’.
SEC. 3. ADDITIONAL DISCLOSURE.
(a) D EFINITIONS .—In this section—
(1) the term ‘‘audit report’’ has the meaning given the
term in section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a));
(2) the term ‘‘Commission’’ means the Securities and
Exchange Commission;
(3) the term ‘‘covered form’’—
(A) means— 15 USC 7214a. Deadline. Time period. Determinations.
Certifications.
VerDate Sep 11 2014 11:07 Dec 23, 2020 Jkt 019139 PO 00222 Frm 00002 Fmt 6580 Sfmt 6581 E:PUBLAWPUBL222.116 PUBL222wwoods2 on LAPJF8D0R2PROD with PUBLAW134 STAT. 1065 PUBLIC LAW 116–222—DEC. 18, 2020
(i) the form described in section 249.310 of title
17, Code of Federal Regulations, or any successor regu-lation; and
(ii) the form described in section 249.220f of title
17, Code of Federal Regulations, or any successor regu-lation; and (B) includes a form that—
(i) is the equivalent of, or substantially similar
to, the form described in clause (i) or (ii) of subpara-graph (A); and
(ii) a foreign issuer files with the Commission
under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or rules issued under that Act;
(4) the terms ‘‘covered issuer’’ and ‘‘non-inspection year’’
have the meanings given the terms in subsection (i)(1) of section 104 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214), as added by section 2 of this Act; and
(5) the term ‘‘foreign issuer’’ has the meaning given the
term in section 240.3b–4 of title 17, Code of Federal Regula-tions, or any successor regulation. (b) R
EQUIREMENT .—Each covered issuer that is a foreign issuer
and for which, during a non-inspection year with respect to the covered issuer, a registered public accounting firm described in subsection (i)(2)(A) of section 104 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7214), as added by section 2 of this Act, has prepared an audit report shall disclose in each covered form filed by that issuer that covers such a non-inspection year—
(1) that, during the period covered by the covered form,
such a registered public accounting firm has prepared an audit report for the issuer;
(2) the percentage of the shares of the issuer owned by
governmental entities in the foreign jurisdiction in which the issuer is incorporated or otherwise organized;
(3) whether governmental entities in the applicable foreign
jurisdiction with respect to that registered public accounting firm have a controlling financial interest with respect to the issuer;
(4) the name of each official of the Chinese Communist
Party who is a member of the board of directors of—
(A) the issuer; or (B) the operating entity with respect to the issuer;
and (5) whether the articles of incorporation of the issuer (or
equivalent organizing document) contains any charter of the
VerDate Sep 11 2014 11:07 Dec 23, 2020 Jkt 019139 PO 00222 Frm 00003 Fmt 6580 Sfmt 6581 E:PUBLAWPUBL222.116 PUBL222wwoods2 on LAPJF8D0R2PROD with PUBLAW134 STAT. 1066 PUBLIC LAW 116–222—DEC. 18, 2020
LEGISLATIVE HISTORY—S. 945:
CONGRESSIONAL RECORD, Vol. 166 (2020):
May 20, considered and passed Senate. Dec. 2, considered and passed House.
Æ Chinese Communist Party, including the text of any such charter.
Approved December 18, 2020.
VerDate Sep 11 2014 11:07 Dec 23, 2020 Jkt 019139 PO 00222 Frm 00004 Fmt 6580 Sfmt 6580 E:PUBLAWPUBL222.116 PUBL222wwoods2 on LAPJF8D0R2PROD with PUBLAW