The US House of Representatives passed H.R. 3625, the “PCAOB Whistleblower Protection Act of 2019,” on September 19, which would reward as well as protect an individual who provides the Public Company Accounting Oversight Board with information relating to a violation of the Sarbanes Oxley Act of 2002, the rules of the PCAOB, or the provisions of the securities laws relating to the preparation and issuance of audit reports and the obligations and liabilities of accountants with respect to the PCAOB or professional standards. The determination of the amount of the award would be at the discretion of the PCAOB and would cover disciplinary proceeds by the PCAOB resulting in monetary sanctions exceeding $250,000, with the award being equal to not less than 10 percent and not more than 30 percent in total of what has been collected of the imposed monetary sanctions.
Awards would not be given to a member, officer or employee of an appropriate regulatory agency, the Department of Justice, a self-regulatory organization, the PCAOB or a law enforcement organization. Nor would one be given to anyone who gains information through the performance of an audit of financial statements required under the securities laws. In general, action could not be brought more than six years after the violation of the law.
The identity of the whistleblower could not be disclosed by the PCAOB unless and until required to be disclosed to a defendant or respondent in connection with a public proceeding. No employer could discharge or in any way discriminate against a whistleblower in terms of conditions of employment because of any lawful act done by the whistleblower. Should there be such discrimination, the whistleblower would need to be reinstated with the same senority status that the individual would have had, given two times the amount of back pay otherwise owed with interest and compensation for litigation costs, expert witness fees and reasonable attorneys’ fees.
This legislation was sent to the Senate on September 23. KPMG’s former partner, David Middendorf was sentenced on September 11 to a prison term of one year and a day for his part in obtaining advance information of which engagements would be inspected by the PCAOB (see sbr 5/17). In June, the SEC ordered the firm to pay a penalty of $50 million.
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