[Federal Register Volume 68, Number 117 (Wednesday, June 18, 2003)]
[Notices]
[Pages 36614-36616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15355]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48027; File No. PCAOB-2003-01]
Public Company Accounting Oversight Board; Notice of Filing of
Proposed Bylaws and Amendment No. 1 Thereto
June 13, 2003.
Pursuant to section 107(b) of the Sarbanes-Oxley Act of 2002 (the
``Sarbanes-Oxley Act'' or ``Act''),\1\ notice is hereby given that on
March 3, 2003, the Public Company Accounting Oversight Board (the
``Board'' or the ``PCAOB'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule as described in Items
I, II, and III below, which items have been prepared by the Board. On
April 30, 2003, the PCAOB filed Amendment No. 1 to the proposed rule.
The Commission is publishing this notice to solicit comments on the
proposed rule from interested persons.
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\1\ 15 U.S.C. 7217(b).
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I. Board's Statement of the Terms of Substance of the Proposed Rule
On January 9, 2003, the Board adopted its bylaws. On April 25,
2003, the Board adopted an amendment to Article VI of the bylaws to
specify the powers of the Chair. In general, the bylaws implement Title
I of the Sarbanes-Oxley Act by establishing a principal office in
Washington, DC, and by establishing the composition of a Governing
Board, and the powers and duties of the Governing Board and officers.
The bylaws are intended by the Board to be effective as of their
initial adoption by a unanimous vote of the Board members. The Board is
therefore proposing that the Commission approve the bylaws effective as
of January 9, 2003.
II. Board's Statement of the Purpose of, and Statutory Basis for, the
Proposed Rule
In its filing with the Commission, the Board included statements
concerning the purpose of, and basis for, the proposed rule and
discussed any comments it received on the proposed rule. The text of
these statements may be examined at the places specified in Item IV
below. The Board has prepared summaries, set forth 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 Rule
The Sarbanes-Oxley Act established the Board as a nonprofit
corporation, subject to and with all the powers conferred upon a
nonprofit corporation by the District of Columbia Nonprofit Corporation
Act, to oversee the audits of public companies that are subject to the
securities laws, and related matters, in order to protect the interests
of investors and further the public interest in the preparation of
informative, accurate, and independent audit reports for companies the
securities of which are sold to, and held by and for, public investors.
The Board's bylaws implement Title I of the Sarbanes-Oxley Act by
establishing a principal office in Washington, DC, and by establishing
the composition of a Governing Board, and the powers and duties of the
Governing Board and officers. Among the provisions of the bylaws are
rules for establishing a quorum and providing that an act approved by
majority vote of the members of the Governing Board present at a
meeting of the Board at which a quorum is present shall be an act of
the Board. The bylaws also provide for including a recused Board member
in the count for quorum purposes only in exigent circumstances, in
which the Board is required to act within a limited period of time or
in which the public interest or the protection of investors otherwise
prevents the deferral of action until a quorum of non-recused members
is available.
The Board's bylaws also provide that the Governing Board shall hold
at least one public meeting each month, on the first Tuesday of the
month (the ``Regular Public Meeting'') or at such other time as the
Chair shall determine. The bylaws require the Board to adopt a written
Open Meeting Policy defining the circumstances under which meetings of
the Board will be open to the public and to include in that Open
Meeting Policy procedures to ensure that the public is informed, at
least five calendar days in advance, of the time, location, and general
topics scheduled for discussion at each Regular Public Meeting. The
bylaws also permit the Governing Board to hold additional meetings
(``Special Meetings''), which may be public or non-public (in
accordance with the Open Meeting Policy), as it deems necessary or
appropriate to further the purposes of the Sarbanes-Oxley Act. The
bylaws require that the Open Meeting Policy set forth procedures for
providing the public with reasonable notice of public Special Meetings,
and they permit the Governing Board to meet by telephone, provided
that, in the case of a public meeting, at least one Board member is
present at the location specified in the meeting notice.
The bylaws provide that the Chair shall also be the President and
Chief Executive Officer of the Corporation and that the other Governing
Board members shall also be Vice Presidents of the Corporation. Section
6.2 of the bylaws provides that the other officers of the Corporation
shall include a Secretary, Treasurer, General Counsel, Chief Auditor,
Chief Administrative Officer, Director of Inspections and Registration,
Director of Investigations and Enforcement, and such other officers as
the Governing Board may establish in accordance with such rules of the
Board as may be adopted for establishing officers.
Section 6.3 of the bylaws provides that the Chief Executive Officer
is responsible for, and has authority over, the management and
administration of the Corporation, including: (i) Responsibility and
authority for the appointment, dismissal, and supervision of personnel
(other than Board members and personnel
[[Page 36615]]
employed regularly and full-time within the immediate offices of the
Board members); (ii) the distribution of business among such personnel
and among organizational units of the Corporation; (iii) the use and
expenditure of funds (including the procurement of goods and services);
and (iv) the development (for Board review) of strategic policy
initiatives.
The bylaws also provide that in carrying out any of the
responsibilities under the provisions of section 6.3 of the bylaws, the
Chief Executive Officer shall be governed by the general policies of
the Governing Board and by such rules and decisions as the Governing
Board may lawfully make. The bylaws also provide that the appointment
by the Chief Executive Officer of the officers of the Corporation
designated in and established under section 6.2 shall be subject to the
approval of, and made in consultation with, the Governing Board. The
bylaws also provide that the dismissal of the officers of the
Corporation designated in and established under section 6.2 shall be
made in consultation with the Governing Board, except that when the
Board determines that the dismissal arises out of a conflict regarding
the general policies of the Governing Board, it is also subject to the
approval of the Governing Board.
The bylaws also provide that each Board member has the
responsibility and authority for the appointment, dismissal, and
supervision of personnel employed regularly and full-time within the
immediate office of the Board member. The Board member's responsibility
and authority for these persons would be subject to the Governing
Board's overall personnel policies.
The bylaws also provide that the Chief Executive Officer has the
responsibility and authority to develop, and present to the Board for
approval, an annual budget as well as mid-year adjustments, if any. The
bylaws further provide that there is reserved to the Governing Board
its responsibility and authority with respect to determining the
distribution of funds according to major programs and purposes,
including those related to salary schedules and other conditions of
employment.
The bylaws also provide that no contract entered into by or on
behalf of the Corporation shall personally obligate any employee,
officer, or Governing Board member, including the employee, officer or
Governing Board member authorizing or executing such a contract.
Further, unless otherwise prohibited by law, the bylaws provide for the
Corporation to indemnify employees, officers, and Governing Board
members, and any former employees, officers, or Governing Board
members, against any and all expenses and liabilities actually and
necessarily incurred by him or her, or imposed on him or her, in
connection with any claim, action, suit, or proceeding (whether actual
or threatened, civil, criminal, administrative, or investigative,
including appeals), to which he or she may be or is made a party by
reason of being or having been an employee, officer, or Board member,
except that there shall be no indemnification in relation to matters as
to which the Board finds that the employee, officer, or Board member
acted in bad faith or engaged in willful misconduct in the performance
of a duty to the Corporation. Amounts paid in indemnification of
expenses and liabilities may include, but shall not be limited to,
counsel and other related fees, costs and disbursements, and judgments,
fines and penalties against, and amounts paid in settlement by, such
employee, officer, or Board member. The bylaws further permit the
Corporation to advance expenses to, or where appropriate to itself, at
its expense, undertake the defense of any employee, officer, or Board
member, so long as the employee, officer, or Board member undertakes to
repay or reimburse such expense if it should be ultimately determined
that he or she is not entitled to indemnification under the bylaws.
The bylaws also permit the Governing Board to purchase insurance on
behalf of any employee, officer, or Governing Board member against any
liability which may be asserted against or incurred by him or her which
arises out of such person's status as an employee, officer, or Board
member, whether or not the Corporation would have the power to
indemnify such person against that liability under law.
The bylaws permit the Governing Board to adopt such rules of the
Corporation as it deems necessary or appropriate to discharge its
responsibilities under the Sarbanes-Oxley Act. The bylaws also prohibit
any capital expenditure or investment without the approval of the
Board, except as expressly delegated by the Governing Board. Finally,
the bylaws require the Governing Board to retain an accounting firm to
annually audit the Corporation's financial records, which firm shall
not perform any other services, except tax services, for the
Corporation.
In the event that the Commission approves the Board's bylaws, the
Board seeks that they be approved so as to be retroactively effective
as of January 9, 2003.
B. Board's Statement on Burden on Competition
The proposed rule does not impose any burden on competition.
C. Board's Statement on Comments on the Proposed Rule Received From
Members, Participants or Others
The Board has not solicited, and does not intend to solicit,
comments on this proposed rule. The Board has not received any
unsolicited written comments.
III. Date of Effectiveness of the Proposed Rule and Timing for
Commission Action
Within 35 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 such proposed rule; or
(b) institute proceedings to determine whether the proposed rule
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 rule
is consistent with the requirements of Title I of the Sarbanes-Oxley
Act and the Exchange Act. Persons making written submissions should
file six copies thereof with the Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of
the submission, all subsequent amendments, all written statements with
respect to the proposed rule that are filed with the Commission, and
all written communications relating to the proposed rule change 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 inspection and copying in the Commission's Public
Reference Room in Washington, DC. Copies of such filing will also be
available for inspection and copying at the principal office of the
PCAOB. All submissions should refer to File No. SR-PCAOB-2003-01 and
should be submitted by July 9, 2003.
[[Page 36616]]
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-15355 Filed 6-17-03; 8:45 am]
BILLING CODE 8010-01-P