§7215 Investigations and Disciplinary Proceedings

Summary

The Board must make fair rules for investigating and punishing registered public accounting firms and the people who work for them. Under those rules, the Board can look into any act, practice, or failure to act by a firm or its associated persons that might break the Act, the Board’s rules, securities laws about audit reports, or professional standards. The Board can require people to testify, demand audit work papers and other documents, inspect books and records, ask other people or clients for information, and ask the Commission to issue subpoenas when needed. If a firm or person refuses to cooperate, the Board can suspend or bar that person from working with a registered firm, require the firm to end the association, suspend or revoke the firm’s registration, or use other lesser sanctions described in the Board’s rules. The Board must tell the Commission about any investigation that may involve securities-law violations and coordinate with the Commission’s enforcement staff. The Board can also refer investigations to the Commission, to a self-regulatory organization for broker-dealer audits, to the proper federal regulator for regulated institutions, or, at the Commission’s direction, to the U.S. Attorney General, state attorneys general, or appropriate state regulators. Documents and information made or received by the Board for inspections or investigations are confidential and protected from court discovery and Freedom of Information Act release unless they are put into a public proceeding or released under the Board’s rules. The Board may, without losing that protection, share such information with the Commission and, when needed to serve the Act’s purposes or protect investors, with the Attorney General, relevant federal regulators, state attorneys general, state regulators, or a self-regulatory organization. The Board may also share certain materials with foreign auditor oversight authorities if the Board finds it necessary, the foreign authority gives confidentiality assurances and describes its systems and laws, and the Board approves. Board employees are shielded from civil lawsuits for actions taken while carrying out investigations, like federal employees. When the Board moves to discipline, it must bring specific charges, tell the firm or person about them, give them a chance to defend themselves, and keep a record of the proceedings. Hearings are not public unless the Board orders this for good cause and the parties agree. Any sanction must be explained with the acts or omissions involved, the specific law, rule, or standard that was violated, and why the sanction was chosen. The Board may impose many kinds of sanctions, including temporary suspension or permanent loss of registration, temporary or permanent suspension or bar of a person from association with a registered firm, limits on duties or operations, censure, required additional education or training, or other sanctions in the Board’s rules. The Board may also impose a civil money penalty up to $100,000 for an individual or $2,000,000 for any other person. For intentional, knowing, reckless conduct or repeated negligent violations, higher limits apply: up to $750,000 for an individual or $15,000,000 for any other person. The Board can sanction a firm or a supervisory person if a failure to reasonably supervise led to a violation, unless that supervisor had reasonable procedures in place and followed them. A person who is suspended or barred may not willfully work with a registered firm or serve in an accounting or financial management role for an issuer, broker, or dealer without the Board’s or Commission’s consent, and firms or issuers that knew or should have known of the suspension may not permit such association. The Board must report any sanction to the Commission, the appropriate state regulators or foreign accountancy licensing boards, and to the public once any stay is lifted. The report must name the sanctioned person, describe the sanction and why it was imposed, and may include other relevant information. If the Commission is asked to review a Board disciplinary action, that review normally stays (pauses) the discipline unless the Commission decides otherwise. The Commission must have an expedited process to decide how long any such stay should last.