15 U.S.C. § 80a–31 — Accountants and auditors

submitted 86 years ago by ch. 686 to r/title-15-COMMERCE-AND-TRADE · 675 words · no verdicts yet

in plain englishAI-generated · not legal advice

Investment companies must let non-interested directors pick, and let shareholders confirm or fire, their outside accountant. Someone must also properly choose the company's controller. The SEC can require accountants to keep their work papers available for inspection.

(a) Selection of accountant. A registered management company or face-amount certificate company can't file a financial statement signed by an independent public accountant unless: (1) directors who aren't "interested persons" of the company picked that accountant, by an in-person majority vote at a meeting held within 30 days of the fiscal year starting or before that year's annual shareholder meeting; (2) that pick was submitted to shareholders to ratify or reject at the next annual meeting, if one is held — except a vacancy from the accountant's death or resignation can be filled the same way as in (1); (3) the company can fire the accountant at any time, without penalty, by a majority vote of outstanding voting securities at a meeting called for that purpose; and (4) the accountant's certificate or report must be addressed to both the board and the security holders. If shareholders reject the pick or fire the accountant, a majority of outstanding voting securities can fill the vacancy, at that same meeting or a later one called for the purpose. For a common-law trust under section 80a–16(c), shareholder ratification isn't required, but a majority of outstanding trust shares can remove the accountant the same way they'd remove a trustee under that section, using the same meeting-notice rules; the "majority" definition from section 80a–2(a)(42) applies to that vote. (b) Selection of controller or other principal accounting officer. A company can't file a financial statement prepared with help from a controller, or other principal accounting officer or employee, unless that person was chosen by the security holders at the last annual meeting or by the board of directors. (c) Reports of accountants and auditors. The SEC can require accountants and auditors to keep their reports, work papers, and related documents about registered investment companies for as long as the SEC prescribes, and to make them available for the SEC to inspect.

the actual law source: uscode.house.gov ↗public domain

(a) Selection of accountant

It shall be unlawful for any registered management company or registered face-amount certificate company to file with the Commission any financial statement signed or certified by an independent public accountant, unless—

(1)

such accountant shall have been selected at a meeting held within thirty days before or after the beginning of the fiscal year or before the annual meeting of stockholders in that year by the vote, cast in person, of a majority of those members of the board of directors who are not interested persons of such registered company;

(2)

such selection shall have been submitted for ratification or rejection at the next succeeding annual meeting of stockholders if such meeting be held, except that any vacancy occurring between annual meetings, due to the death or resignation of the accountant, may be filled by the vote of a majority of those members of the board of directors who are not interested persons of such registered company, cast in person at a meeting called for the purpose of voting on such action;

(3)

the employment of such accountant shall have been conditioned upon the right of the company by vote of a majority of the outstanding voting securities at any meeting called for the purpose to terminate such employment forthwith without any penalty; and

(4)

such certificate or report of such accountant shall be addressed both to the board of directors of such registered company and to the security holders thereof.

If the selection of an accountant has been rejected pursuant to paragraph (2) or his employment terminated pursuant to paragraph (3), the vacancy so occurring may be filled by a vote of a majority of the outstanding voting securities, either at the meeting at which the rejection or termination occurred or, if not so filled, at a subsequent meeting which shall be called for the purpose. In the case of a common-law trust of the character described in section 80a–16(c) of this title, no ratification of the employment of such accountant shall be required but such employment may be terminated and such accountant removed by action of the holders of record of a majority of the outstanding shares of beneficial interest in such trust in the same manner as is provided in section 80a–16(c) of this title in respect of the removal of a trustee, and all the provisions therein contained as to the calling of a meeting shall be applicable. In the event of such termination and removal, the vacancy so occurring may be filled by action of the holders of record of a majority of the shares of beneficial interest either at the meeting, if any, at which such termination and removal occurs, or by instruments in writing filed with the custodian, or if not so filed within a reasonable time then at a subsequent meeting which shall be called by the trustees for the purpose. The provisions of paragraph (42) of section 80a–2(a) of this title as to a majority shall be applicable to the vote cast at any meeting of the shareholders of such a trust held pursuant to this subsection.

(b) Selection of controller or other principal accounting officer

No registered management company or registered face-amount certificate company shall file with the Commission any financial statement in the preparation of which the controller or other principal accounting officer or employee of such company participated, unless such controller, officer or employee was selected, either by vote of the holders of such company’s voting securities at the last annual meeting of such security holders, or by the board of directors of such company.

The Commission is authorized, by rules and regulations or order in the public interest or for the protection of investors, to require accountants and auditors to keep reports, work sheets, and other documents and papers relating to registered investment companies for such period or periods as the Commission may prescribe, and to make the same available for inspection by the Commission or any member or representative thereof.

Source credit: (Aug. 22, 1940, ch. 686, title I, § 32, 54 Stat. 838; Pub. L. 91–547, § 18, Dec. 14, 1970, 84 Stat. 1427; Pub. L. 94–29, § 28(4), June 4, 1975, 89 Stat. 165.)

history & why it existsrecord from the source credit

1940Enacted · Act of Aug. 22, 1940, ch. 686 · 54 Stat. 838
1970Amended · Pub. L. 91-547 · 84 Stat. 1427
1975Amended · Pub. L. 94-29 · 89 Stat. 165

A history note hasn’t been published yet. The record shows enactment by ch. 686 on 1940-08-22.

all 0 arguments · sorted by: best

no arguments yet — make the first case