PCAOB Whistleblower Protection Act of 2019

IIB 116TH CONGRESS 1ST SESSION H. R. 3625 IN THE SENATE OF THE UNITED STATES SEPTEMBER 23, 2019 Received; read twice and referred to the Committee on Banking, Housing, and Urban Affairs AN ACT To establish a whistleblower program at the Public Company Accounting Oversight Board, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 2 HR 3625 RFS SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘PCAOB Whistleblower 2 Protection Act of 2019’’. 3 SEC. 2. WHISTLEBLOWER INCENTIVES AND PROTECTION. 4 The Sarbanes-Oxley Act of 2002 is amended— 5 (1) in section 105 (15 U.S.C. 7215) by adding 6 at the end the following: 7 ‘‘(f) WHISTLEBLOWER INCENTIVES AND PROTEC- 8 TION.— 9 ‘‘(1) DEFINITIONS.—In this subsection the fol- 10 lowing definitions shall apply: 11 ‘‘(A) COVERED PROCEEDING.—The term 12 ‘covered proceeding’ means any disciplinary 13 proceeding by the Board initiated after the date 14 of the enactment of this subsection that results 15 in monetary sanctions exceeding $250,000. 16 ‘‘(B) ORIGINAL INFORMATION.—The term 17 ‘original information’ means information that— 18 ‘‘(i) is derived from the independent 19 knowledge or analysis of a whistleblower; 20 ‘‘(ii) is not known to the Board from 21 any other source, unless the whistleblower 22 is the original source of the information; 23 and 24 ‘‘(iii) is not exclusively derived from 25 an allegation made in a disciplinary pro- 26 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 3 HR 3625 RFS ceeding, in a judicial or administrative 1 hearing, in a governmental report, hearing, 2 audit, or investigation, or from the news 3 media, unless the whistleblower is a source 4 of the information. 5 ‘‘(C) MONETARY SANCTIONS.—The term 6 ‘monetary sanctions’ means any civil money 7 penalties imposed by the Board under sub- 8 section (c)(4) as modified by the Commission 9 under section 107(c)(3). 10 ‘‘(D) WHISTLEBLOWER.— 11 ‘‘(i) IN GENERAL.—The term ‘whistle- 12 blower’ means any individual who provides, 13 or two or more individuals acting jointly 14 who provide, information relating to a vio- 15 lation of this Act, the rules of the Board, 16 the provisions of the securities laws relat- 17 ing to the preparation and issuance of 18 audit reports and the obligations and li- 19 abilities of accountants with respect there- 20 to, including the rules of the Board issued 21 pursuant to this Act, or professional stand- 22 ards. 23 ‘‘(ii) SPECIAL RULE.—Solely for the 24 purposes of paragraph (7), the term ‘whis- 25 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 4 HR 3625 RFS tleblower’ shall also include any individual 1 who takes an action described in para- 2 graph 7(A), or two or more individuals act- 3 ing jointly who take an action described in 4 paragraph 7(A). 5 ‘‘(2) AWARDS.— 6 ‘‘(A) IN GENERAL.—In any covered dis- 7 ciplinary proceeding, the Board shall pay an 8 award or awards to one or more whistleblowers 9 who voluntarily provided original information to 10 the Board that resulted in the board imposing 11 monetary sanctions, in an aggregate amount 12 determined in the discretion of the Board but 13 equal to— 14 ‘‘(i) not less than 10 percent, in total, 15 of what has been collected of the monetary 16 sanctions imposed; and 17 ‘‘(ii) not more than 30 percent, in 18 total, of what has been collected of the 19 monetary sanctions. 20 ‘‘(B) PAYMENT OF AWARDS.—Any amount 21 paid under this subparagraph shall be paid 22 from any funds generated from the collection of 23 monetary sanctions. 24 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 5 HR 3625 RFS ‘‘(3) DETERMINATION OF AMOUNT OF AWARD; 1 DENIAL OF AWARD.— 2 ‘‘(A) DETERMINATION OF AMOUNT OF 3 AWARD.— 4 ‘‘(i) DISCRETION.—The determination 5 of the amount of an award made under 6 paragraph (2) shall be in the discretion of 7 the Board. 8 ‘‘(ii) CRITERIA.—In determining the 9 amount of an award made under subpara- 10 graph (A), the Board shall take into con- 11 sideration— 12 ‘‘(I) the significance of the infor- 13 mation provided by the whistleblower 14 to the success of the disciplinary pro- 15 ceeding; 16 ‘‘(II) the degree of assistance 17 provided by the whistleblower and any 18 legal representative of the whistle- 19 blower in a disciplinary proceeding; 20 and 21 ‘‘(III) the programmatic interest 22 of the Board in deterring violations by 23 making awards to whistleblowers who 24 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 6 HR 3625 RFS provide information that lead to suc- 1 cessful enforcement. 2 ‘‘(B) DENIAL OF AWARD.—No award 3 under subparagraph (A) shall be made— 4 ‘‘(i) to any whistleblower who is, or 5 was at the time the whistleblower acquired 6 the original information submitted to the 7 Board, a member, officer, or employee of— 8 ‘‘(I) an appropriate regulatory 9 agency (as such term is defined in 10 section 3 of the Securities Exchange 11 Act of 1934); 12 ‘‘(II) the Department of Justice; 13 ‘‘(III) a self-regulatory organiza- 14 tion (as such term is defined in sec- 15 tion 34 of the Securities Exchange 16 Act of 1934); 17 ‘‘(IV) the Public Company Ac- 18 counting Oversight Board; or 19 ‘‘(V) a law enforcement organiza- 20 tion; 21 ‘‘(ii) to any whistleblower who is con- 22 victed of a criminal violation related to the 23 Board finding for which the whistleblower 24 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 7 HR 3625 RFS otherwise could receive an award under 1 this section; 2 ‘‘(iii) to any whistleblower who gains 3 the information through the performance 4 of an audit of financial statements re- 5 quired under the securities laws and for 6 whom such submission would be contrary 7 to the requirements of section 10A of the 8 Securities Exchange Act of 1934 (15 9 U.S.C. 78j–1); and 10 ‘‘(iv) to any whistleblower who fails to 11 submit information to the Board in such 12 form as the Board may, by rule, require. 13 ‘‘(4) REPRESENTATION.— 14 ‘‘(A) PERMITTED REPRESENTATION.—Any 15 whistleblower who makes a claim for an award 16 under paragraph (2) may be represented by 17 counsel. 18 ‘‘(B) REQUIRED REPRESENTATION.— 19 ‘‘(i) IN GENERAL.—Any whistleblower 20 who anonymously makes a claim for an 21 award under paragraph (2) shall be rep- 22 resented by counsel if the whistleblower 23 anonymously submits the information upon 24 which the claim is based. 25 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 8 HR 3625 RFS ‘‘(ii) DISCLOSURE OF IDENTITY.— 1 Prior to the payment of an award, a whis- 2 tleblower shall disclose the identity of the 3 whistleblower and provide such other infor- 4 mation as the Board may require, directly 5 or through counsel, for the whistleblower. 6 ‘‘(5) NO CONTRACT NECESSARY.—No contract 7 with the Board is necessary for any whistleblower to 8 receive an award under paragraph (2), unless other- 9 wise required by the Board by rule. 10 ‘‘(6) APPEALS.—Any determination made under 11 this subsection, including whether, to whom, or in 12 what amount to make awards, shall be in the discre- 13 tion of the Board. Any such determination, except 14 the determination of the amount of an award if the 15 award was made in accordance with this paragraph, 16 may be appealed to the Commission not more than 17 30 days after the determination is issued by the 18 Board. The Commission shall review the determina- 19 tion made by the Board in accordance with section 20 107(c). 21 ‘‘(7) PROTECTION OF WHISTLEBLOWERS.— 22 ‘‘(A) PROHIBITION AGAINST RETALIA- 23 TION.—No employer may discharge, demote, 24 suspend, threaten, harass, directly or indirectly, 25 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 9 HR 3625 RFS or in any other manner discriminate against, a 1 whistleblower in the terms and conditions of 2 employment because of any lawful act done by 3 the whistleblower— 4 ‘‘(i) in providing information to the 5 Board in accordance with this subsection; 6 ‘‘(ii) in initiating, testifying in, or as- 7 sisting in any investigation or judicial or 8 administrative action of the Board based 9 upon or related to such information; or 10 ‘‘(iii) in making disclosures that are 11 required or protected under the Sarbanes- 12 Oxley Act of 2002 (15 U.S.C. 7201 et 13 seq.), the Securities Exchange Act of 1934 14 (15 U.S.C. 78a et seq.), including section 15 10A(m) of such Act (15 U.S.C. 78f(m)), 16 section 1513(e) of title 18, United States 17 Code, and any other law, rule, or regula- 18 tion subject to the jurisdiction of the Secu- 19 rities Exchange Commission. 20 ‘‘(iv) in providing information regard- 21 ing any conduct that the whistleblower rea- 22 sonably believes constitutes a potential vio- 23 lation of any law, rule, or regulation sub- 24 ject to the jurisdiction of the Board or the 25 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 10 HR 3625 RFS Commission (including disclosures that are 1 required or protected under the Sarbanes- 2 Oxley Act of 2002 or the Securities Ex- 3 change Act of 1934) to— 4 ‘‘(I) a person with supervisory 5 authority over the whistleblower at the 6 whistleblower’s employer, where such 7 employer is an entity registered with 8 or required to be registered with the 9 Board, the Commission, a self-regu- 10 latory organization, or a State securi- 11 ties commission or office performing 12 like functions; or 13 ‘‘(II) such other person working 14 for the employer described under sub- 15 clause (I) who has the authority to in- 16 vestigate, discover, or terminate mis- 17 conduct. 18 ‘‘(B) ENFORCEMENT OF PROHIBITION 19 AGAINST RETALIATION.— 20 ‘‘(i) CAUSE OF ACTION.—An indi- 21 vidual who alleges discharge or other dis- 22 crimination in violation of subparagraph 23 (A) may bring an action under this para- 24 graph in the appropriate district court of 25 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 11 HR 3625 RFS the United States for the relief provided in 1 subparagraph (C). 2 ‘‘(ii) SUBPOENAS.—A subpoena re- 3 quiring the attendance of a witness at a 4 trial or hearing conducted under this sub- 5 section may be served at any place in the 6 United States. 7 ‘‘(iii) STATUTE OF LIMITATIONS.— 8 ‘‘(I) IN GENERAL.—An action 9 under this paragraph may not be 10 brought— 11 ‘‘(aa) more than 6 years 12 after the date on which the viola- 13 tion of subparagraph (A) oc- 14 curred; or 15 ‘‘(bb) more than 3 years 16 after the date when facts mate- 17 rial to the right of action are 18 known or reasonably should have 19 been known by the employee al- 20 leging a violation of subpara- 21 graph (A). 22 ‘‘(II) REQUIRED ACTION WITHIN 23 10 YEARS.—Notwithstanding sub- 24 clause (I), an action under this para- 25 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 12 HR 3625 RFS graph may not in any circumstance be 1 brought more than 10 years after the 2 date on which the violation occurs. 3 ‘‘(C) RELIEF.—Relief for an individual 4 prevailing in an action brought under this para- 5 graph shall include— 6 ‘‘(i) reinstatement with the same se- 7 niority status that the individual would 8 have had, but for the discrimination; 9 ‘‘(ii) two times the amount of back 10 pay otherwise owed to the individual, with 11 interest; and 12 ‘‘(iii) compensation for litigation 13 costs, expert witness fees, and reasonable 14 attorneys’ fees. 15 ‘‘(D) CONFIDENTIALITY.— 16 ‘‘(i) IN GENERAL.—Except as pro- 17 vided in clause (ii), the Board and any of- 18 ficer or employee of the Board may not 19 disclose any information, including infor- 20 mation provided by a whistleblower to the 21 Board, which could reasonably be expected 22 to reveal the identity of a whistleblower 23 unless and until required to be disclosed to 24 a defendant or respondent in connection 25 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 13 HR 3625 RFS with a public proceeding instituted by the 1 Commission or any entity described in 2 clause (iii). 3 ‘‘(ii) RULE OF CONSTRUCTION.— 4 Nothing in this section is intended to limit, 5 or shall be construed to limit, the ability of 6 the Attorney General to present such evi- 7 dence to a grand jury or to share such evi- 8 dence with potential witnesses or defend- 9 ants in the course of an ongoing criminal 10 investigation. 11 ‘‘(iii) AVAILABILITY TO GOVERNMENT 12 AGENCIES.— 13 ‘‘(I) IN GENERAL.—Without the 14 loss of its status as confidential in the 15 hands of the Board, all information 16 referred to in clause (i) may, in the 17 discretion of the Board, when deter- 18 mined by the Board to be necessary to 19 accomplish the purposes of this Act 20 and to protect investors, be made 21 available to— 22 ‘‘(aa) the Attorney General 23 of the United States; 24 VerDate Sep 11 2014 03:13 Sep 24, 2019 Jkt 089200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H3625.RFS H3625 kjohnson on DSK79L0C42 with BILLS 14 HR 3625 RFS ‘‘(bb) an appropriate regu- 1 latory authority; 2 ‘‘(cc) a self-regulatory orga- 3 nization; 4 ‘‘(dd) a State attorney gen- 5 eral in connection with any crimi- 6 nal investigation; 7 ‘‘(ee) any appropriate State 8 regulatory authority; 9 ‘‘(ff) the Commission; 10 ‘‘(gg) a foreign securities 11 authority; and 12 ‘‘(hh) a foreign law enforce- 13 ment authority. 14 ‘‘(II) CONFIDENTIALITY.— 15 ‘‘(aa) IN GENERAL.—Each 16 of the entities described in items 17 (aa) through (ff) of subclause (I) 18 shall maintain such information 19 as confidential in accordance with 20 the requirements established 21 under clause (i). 22 ‘‘(bb) FOREIGN AUTHORI- 23 TIES.—Each of the entities de- 24 scribed in subclauses (gg) [Text truncated for display. 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