[Federal Register Volume 86, Number 215 (Wednesday, November 10, 2021)]
[Notices]
[Pages 62581-62582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-24566]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93527; File No. PCAOB-2021-01]


Public Company Accounting Oversight Board; Order Granting 
Approval of Proposed Rule Governing Board Determinations Under the 
Holding Foreign Companies Accountable Act

November 4, 2021.

I. Introduction

    On September 23, 2021, the Public Company Accounting Oversight 
Board (the ``Board'' or the ``PCAOB'') filed with the Securities and 
Exchange Commission (the ``Commission''), pursuant to Section 107(b) 
\1\ of the Sarbanes-Oxley Act of 2002 (as amended, the ``Sarbanes-Oxley 
Act'') and Section 19(b) \2\ of the Securities Exchange Act of 1934 
(the ``Exchange Act''), a proposal to adopt a new rule, PCAOB Rule 
6100, Board Determinations Under the Holding Foreign Companies 
Accountable Act (the ``Proposed Rule'').\3\ The Proposed Rule was 
published for comment in the Federal Register on September 28, 2021.\4\ 
This order approves the Proposed Rule, which we find to be consistent 
with the requirements of the Sarbanes-Oxley Act and the securities laws 
and necessary or appropriate in the public interest or for the 
protection of investors.
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    \1\ 15 U.S.C. 7217(b).
    \2\ 15 U.S.C. 78s(b).
    \3\ See Rule Governing Board Determinations Under the Holding 
Foreign Companies Accountable Act, PCAOB Release No. 2021-004 (Sept. 
22, 2021) (``PCAOB Adopting Release''), available at https://pcaob-assets.azureedge.net/pcaob-dev/docs/default-source/rulemaking/docket048/2021-004-hfcaa-adopting-release.pdf?sfvrsn=f6dfb7f8_4.
    \4\ See Public Company Accounting Oversight Board; Notice of 
Filing of Proposed Rule on Board Determinations Under the Holding 
Foreign Companies Accountable Act, Release No. 34-93112 (Sept. 23, 
2021) [86 FR 53699 (Sept. 28, 2021)].
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II. Description of the Proposed Rule

    On September 22, 2021, the Board adopted the Proposed Rule,\5\ 
which is intended to establish a framework for the Board's 
determinations under the Holding Foreign Companies Accountable Act (the 
``HFCAA'') that the Board is unable to inspect or investigate 
completely registered public accounting firms located in a foreign 
jurisdiction because of a position taken by one or more authorities in 
that jurisdiction.
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    \5\ See supra note 3.
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    The Proposed Rule establishes:
     The manner of the Board's determinations;
     The factors the Board will evaluate and the documents and 
information the Board will consider when assessing whether a 
determination is warranted;
     The form, public availability, effective date, and 
duration of such determinations; and
     The process by which the Board will reaffirm, modify, or 
vacate any such determinations.

A. Applicability and Effective Date

    The Proposed Rule will be effective promptly upon approval by the 
Commission.

III. Comment Letters

    The comment period on the Proposed Rule ended on October 18, 2021, 
and we did not receive any comments on the Proposed Rule. The PCAOB 
received and considered public comments prior to adopting the Proposed 
Rule.

IV. Effect on Emerging Growth Companies

    In the PCAOB Adopting Release, the Board concluded that Section 
103(a)(3)(C) of the Sarbanes-Oxley Act does not apply to the Proposed 
Rule.\6\ Section 103(a)(3)(C) of the Sarbanes-Oxley Act requires that 
any rules of the

[[Page 62582]]

Board ``requiring mandatory audit firm rotation or a supplement to the 
auditor's report in which the auditor would be required to provide 
additional information about the audit and the financial statements of 
the issuer (auditor discussion and analysis) shall not apply to an 
audit of an emerging growth company [EGC].'' \7\ The provisions of the 
Proposed Rule do not fall into these categories.
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    \6\ See PCAOB Adopting Release at footnote 112.
    \7\ The term ``emerging growth company'' is defined in Section 
3(a)(80) of the Exchange Act (15 U.S.C. 78c(a)(80)). See also 
Release No. 33-10332 Inflation Adjustments and Other Technical 
Amendments Under Titles I and III of the JOBS Act (Mar. 31, 2017) 
[82 FR 17545 (Apr. 12, 2017)].
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    Section 103(a)(3)(C) further provides that ``[a]ny additional 
rules'' adopted by the PCAOB after April 5, 2012, do not apply to 
audits of EGCs ``unless the Commission determines that the application 
of such additional requirements is necessary or appropriate in the 
public interest, after considering the protection of investors and 
whether the action will promote efficiency, competition, and capital 
formation.'' Since the Proposed Rule does not specify additional 
requirements for audits of EGCs, this provision does not apply to the 
Proposed Rule.
    While we agree with the Board's conclusion that Section 
103(a)(3)(C) of the Sarbanes-Oxley Act does not apply to the Proposed 
Rule, we nonetheless believe the Proposed Rule is necessary or 
appropriate in the public interest, after considering the protection of 
investors and whether the action will promote efficiency, competition, 
and capital formation. Specifically, by establishing a framework for 
the Board's determinations under the HFCAA and requiring firms to 
update their information promptly, all firms, including auditors of 
EGCs, and investors equally benefit from the transparency of the 
Board's determination set forth in the Proposed Rule.

V. Conclusion

    The Commission has carefully reviewed and considered the Proposed 
Rule and the information submitted therewith by the PCAOB. In 
connection with the PCAOB's filing and the Commission's review,
    A. The Commission finds that the Proposed Rule is consistent with 
the requirements of the Sarbanes-Oxley Act and the securities laws and 
is necessary or appropriate in the public interest or for the 
protection of investors; and
    B. Separately, the Commission finds that Section 103(a)(3)(C) of 
the Sarbanes-Oxley Act does not apply to the Proposed Rule.
    It is therefore ordered, pursuant to Section 107 of the Sarbanes-
Oxley Act and Section 19(b)(2) of the Exchange Act, that the Proposed 
Rule (File No. PCAOB-2021-01) be and hereby is approved.

    By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-24566 Filed 11-9-21; 8:45 am]
BILLING CODE 8011-01-P


