House Passes Legislation to Boost Corporate Accountability

WASHINGTON, DC – Wisconsin’s First District Congressman Paul Ryan today voted for corporate accountability legislation to toughen penalties for corporate criminals, protect investors by providing greater oversight of the accounting profession and improve corporate financial disclosure, among other things. This bipartisan legislation – the Conference Report to H.R. 3763 – is the product of an agreement reached between the House and Senate on earlier versions of corporate accountability legislation. This legislation, which passed overwhelmingly by a vote of 423-3 is expected to pass the Senate and be signed into law by the President.

"Our system of free enterprise requires that people play by the rules and that the rules of business are thorough and clear," Ryan said. "Today, too many people have been breaking the rules or finding ways around them. In order to regain confidence in our economy and our companies, we need to punish rule breakers and update our rules so they cannot be thwarted. This legislation will hold those who break this trust accountable for their actions. This is good news for investors whose retirement security and education savings for their children depend on the strength of the market."

The legislation approved by the House today includes the following provisions:

• Creates a Public Company Accounting Oversight Board (created as a nonprofit corporate entity) to oversee the audit of public companies that are subject to securities laws and related matters. Although the Securities and Exchange Commission (SEC) would have oversight and enforcement authority over the five-member Board, the Board would not be an agency of the federal government. No public accounting firm (beginning 180 days after this bill’s enactment) could prepare audits related to a securities issuer without being registered with the Board.
• Prohibits accounting firms from providing both audit and consulting services to a single client.
• Provides for auditor rotation. No individual lead auditor or the audit partner responsible for the review of the audit could provide audit services to the same client for more than five consecutive years.
• Establishes a procedure to disgorge corporate executives’ ill-gotten gains from corporate wrongdoing into a fund for victims.
• Enhances corporate disclosure, including immediate disclosure of any information affecting the material health of the company.
• Prohibits insider trades during blackout periods. This bill would make it illegal for company directors or officers to purchase, sell, or otherwise acquire or transfer securities during any "blackout period" with respect to such securities.
• Grants whistleblower protection to employees of publicly traded companies who provide information regarding the violation of securities, auditing, or other laws addressed in this legislation.
• Increases criminal penalties for a broad array of white-collar crimes. Among these:

• The bill would increase the maximum jail terms for mail and wire fraud from five years to 20 years and create a new 25-year maximum prison term for securities fraud.
• Corruptly altering, destroying, mutilating, or concealing a record or document with the intent to impair an official proceeding or otherwise obstruct such proceeding would carry a 20-year maximum prison term.
• Criminal penalties for pension law violations would be increased from a fine of $5,000 to $100,000 and from maximum jail time of one year to ten years.
• The legislation requires top corporate executives to certify that the financial statements of the company fairly and accurately represent the financial condition of the company. Willfully violating these provisions can subject corporate executives to fines of up to $5 million and 20 years in prison.
• Attempts and conspiracies to commit any federal offense would be subject to the same penalties as if the offense had actually been committed.

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