PlainBillCongress, translated.Legislation. Context. Public interest.Referred to the House Committee on Financial Services.
Congressional Research Service
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People & committees
Rep. Hill, J. French [R-AR-2] · R–AR
Legislative record
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Referred to the House Committee on Financial Services.
Introduced in House
Introduced in House
Primary sources
Text links open the official source. We also preserved the text version used in the PlainBill explanation below.
Source last updated: Oct 2, 2026. Consult Congress.gov for the current record.
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PlainBill explanation
Based on the full Introduced in House · 2026-09-17 text. This explanation has not received human editorial review. This overview describes the proposal’s major provisions; it does not establish what its real-world effects would be.
The proposed Small Business Audit Correction Act of 2026 would change annual audit standards for qualifying privately held securities brokers and dealers that do not hold customer money or securities or maintain customer accounts. These firms would still need annual audits, but could use generally accepted auditing standards instead of Public Company Accounting Oversight Board requirements. Eligibility would depend on size, ownership, financial condition, and disciplinary history. Auditor independence and exemption-report requirements would remain.
This Act may be cited as the Small Business Audit Correction Act of 2026.
including by providing that such broker or dealer satisfies the broker or dealer’s annual audit obligation under Rule 17a–5 through an audit conducted in accordance with generally accepted auditing standards.
(I) receive, directly or indirectly, or hold funds or securities for, or owe funds or securities to, customers; (II) carry accounts of, or for, customers;
the exclusion of a non-carrying broker or dealer that is privately held and in good standing from the audit requirements of the PCAOB under title I of the Sarbanes-Oxley Act of 2002
(i) has not more than 150 persons registered with an association that is registered as a national securities association
(C) as reflected in the most recent financial and operational report filed with the Commission pursuant to section 17 of the Securities Exchange Act of 1934 (15 U.S.C. 78q), is in compliance with Rule 15c3–1 (17 CFR 240.15c3–1)
(D) has not, during the 10-year period preceding that date, been the subject of a Commission order or administrative proceeding with respect to section 15(c)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(3)) or Rule 15c3–3 (17 CFR 240.15c3–3)
Nothing in this Act or the amendments made by this Act may be construed to authorize the Securities and Exchange Commission to amend, waive, or otherwise modify— (1) the requirement that the auditor of a non-carrying broker or dealer that is privately held and in good standing be qualified and independent in accordance with Regulation S–X (17 CFR 210.2–01); or (2) the requirement to file an exemption report pursuant to paragraph (d)(4) of Rule 17a–5.
Section 2 would add an exclusion for qualifying non-carrying, privately held brokers and dealers in good standing to paragraphs (3) and (4) of section 110 of the Sarbanes-Oxley Act. It would also add definitions governing eligibility. The existing paragraphs being amended are not reproduced in the bundle.
Section 110 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7220) is amended— (1) in paragraph (3), by inserting , except that the term does not include a non-carrying broker or dealer that is privately held and in good standing after registered public accounting firm; (2) in paragraph (4), by inserting , except that the term does not include a non-carrying broker or dealer that is privately held and in good standing after registered public accounting firm;
(3) by redesignating paragraphs (5) and (6) as paragraphs (8) and (9), respectively; and (4) by inserting after paragraph (4) the following:
To qualify as non-carrying, a broker or dealer would need no more than 150 people registered with a national securities association as of its latest completed fiscal year-end. At that date, it also could not be affiliated, under the referenced statutory definition, with an investment advisor that holds customer assets as custodian. The 150-person limit concerns registered people, rather than total employees.
(A) as of the last day of the most recently completed fiscal year of the broker or dealer— (i) has not more than 150 persons registered with an association that is registered as a national securities association under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3); and (ii) is not an affiliate (as defined in section 2 of the Bank Holding Company Act of 1956) of an investment advisor that acts as the custodian for customer assets;
Throughout its latest completed fiscal year, a qualifying non-carrying firm could not receive or hold customer money or securities, owe them to customers, or maintain customer accounts. It also could not conduct activities listed in five referenced regulatory paragraphs. Those paragraphs are not reproduced, so the bundle does not describe the complete list of prohibited activities.
(B) throughout the most recently completed fiscal year of the broker or dealer— (i) does not— (I) receive, directly or indirectly, or hold funds or securities for, or owe funds or securities to, customers; (II) carry accounts of, or for, customers; or (III) engage in any of the activities described in paragraphs (i) through (v) of section 240.15c3–1(a)(2) of title 17, Code of Federal Regulations;
A qualifying non-carrying firm would also need Securities Investor Protection Corporation membership throughout its latest completed fiscal year if the referenced law requires membership. It would need to have filed the specified exemption report covering that fiscal year.
(B) throughout the most recently completed fiscal year of the broker or dealer—
(ii) if required under section 3(a)(2) of the Securities Investor Protection Act of 1970 (15 U.S.C. 78ccc(a)(2)), is a member of the Securities Investor Protection Corporation; and (C) filed an exemption report pursuant to section 240.17a–5(d)(4) of title 17, Code of Federal Regulations, covering the broker or dealer’s most recent fiscal year.
The bill's definition of privately held would apply to the broker or dealer, any ultimate parent, and other affiliates. None could have a class of securities registered under section 12 of the Securities Exchange Act or be required to file reports under section 15(d). Eligibility therefore would depend on the wider affiliated group, not just the firm seeking the exemption.
the broker or dealer, and any ultimate parent or other affiliate (as defined in section 2 of the Bank Holding Company Act of 1956) of the broker or dealer— (A) do not have a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l); and (B) are not required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)).
Good standing would be assessed as of the latest completed fiscal year-end. The firm would need Securities and Exchange Commission registration, membership in a registered national securities association, and compliance with the cited financial rule as shown in its most recent financial and operational report. This includes requirements governing minimum net capital and the ratio of debt, or aggregate indebtedness.
as of the last day of the most recently completed fiscal year of the broker or dealer, as applicable, the broker or dealer— (A) is registered with the Commission; (B) is a member of an association that is registered as a national securities association under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3); (C) as reflected in the most recent financial and operational report filed with the Commission pursuant to section 17 of the Securities Exchange Act of 1934 (15 U.S.C. 78q), is in compliance with Rule 15c3–1 (17 CFR 240.15c3–1), including— (i) the minimum dollar net capital requirement; and (ii) the aggregate indebtedness ratio requirement;
A firm would fail the good-standing test if, during the 10 years before the relevant fiscal year-end, it had been subject to a Commission order or administrative proceeding concerning either of the two specified securities-law provisions. A federal or state felony conviction of the firm during that period would also disqualify it.
(D) has not, during the 10-year period preceding that date, been the subject of a Commission order or administrative proceeding with respect to section 15(c)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(3)) or Rule 15c3–3 (17 CFR 240.15c3–3); (E) has not, during the 10-year period preceding that date, been convicted of a felony under Federal or State law;
Good standing would also require that the firm have no associated person, as defined in the referenced law, with certain federal or state felony convictions during the preceding 10 years. Covered convictions include financial-law offenses, mail or wire fraud, securities or commodity transaction fraud, and offenses arising from the listed securities, investment-advisory, banking, credit-union, or insurance businesses.
(F) does not have a person associated with the broker or dealer, as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)), that, during the 10-year period preceding that date, has been convicted of a State or Federal felony— (i) involving any securities, insurance, banking, savings association, or credit union laws; (ii) involving mail or wire fraud; (iii) involving fraud in connection with a purchase or sale of any security or commodity (as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a)); or (iv) arising out of the conduct of the business of— (I) a broker, dealer, municipal securities broker, municipal securities dealer, government securities broker, or government securities dealer, as such terms are defined, respectively, in section 3 of the Securities Exchange Act of 1934; (II) an investment adviser, as defined in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)); (III) a depository institution, as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); (IV) a State credit union or Federal credit union, as such terms are defined, respectively, in section 101 of the Federal Credit Union Act (12 U.S.C. 1752); or (V) an insurance company, as defined in section 201(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5381(a));
At the relevant fiscal year-end, a firm in good standing could not be expelled or suspended from the specified securities or futures associations. It also could not be subject to a domestic or foreign regulatory order denying, suspending, or revoking its registration, or a federal or state court order restricting securities transactions or securities-business conduct.
as of the last day of the most recently completed fiscal year of the broker or dealer
(G) is not— (i) expelled or suspended from— (I) an association that is registered as described in subparagraph (B); or (II) an association that is registered as a registered futures association under section 17 of the Commodity Exchange Act (7 U.S.C. 21); (ii) subject to an order of the Commission, other appropriate regulatory agency, or foreign financial regulatory authority denying, suspending, or revoking the registration of the broker or dealer as a regulated entity; or (iii) subject to an injunction or order entered by a Federal or State court restraining or enjoining the broker or dealer from engaging in or continuing any conduct or practice in connection with the purchase or sale of any security or in connection with any securities business.
The Securities and Exchange Commission would have to amend Rule 17a–5's audit and attestation requirements as necessary to implement the exemption. Qualifying firms would satisfy their annual audit obligation through an audit under generally accepted auditing standards. The proposal would change the applicable audit standards, while retaining an annual audit.
(B) the Securities and Exchange Commission shall amend the audit and attestation requirements of Rule 17a–5 (17 CFR 240.17a–5) to the extent necessary to reflect the exclusion of a non-carrying broker or dealer that is privately held and in good standing from the audit requirements of the PCAOB under title I of the Sarbanes-Oxley Act of 2002, including by providing that such broker or dealer satisfies the broker or dealer’s annual audit obligation under Rule 17a–5 through an audit conducted in accordance with generally accepted auditing standards.
The bill would not authorize the Securities and Exchange Commission to change or waive the requirement for a qualified, independent auditor under Regulation S–X. It likewise would not authorize changing or waiving the Rule 17a–5 exemption-report filing requirement.
Nothing in this Act or the amendments made by this Act may be construed to authorize the Securities and Exchange Commission to amend, waive, or otherwise modify— (1) the requirement that the auditor of a non-carrying broker or dealer that is privately held and in good standing be qualified and independent in accordance with Regulation S–X (17 CFR 210.2–01); or (2) the requirement to file an exemption report pursuant to paragraph (d)(4) of Rule 17a–5.
The Securities and Exchange Commission and the Public Company Accounting Oversight Board would have to make necessary changes to their regulations in effect at enactment. Their deadline, including the Commission's audit-rule changes, would be 180 days after the bill's specified effective date.
Not later than 180 days after the effective date described in subsection (d)— (A) the Securities and Exchange Commission and the Public Company Accounting Oversight Board (PCAOB) shall make any necessary amendments to regulations of the Commission and the PCAOB, respectively, that are in effect as of the date of enactment of this Act in order to carry out this Act and the amendments made by this Act; and (B) the Securities and Exchange Commission shall amend the audit and attestation requirements of Rule 17a–5
The provisions added by the bill's amendments would take effect 180 days after enactment. These are conditional deadlines; the supplied text does not provide a calendar effective date.
(d) Effective date The provisions added by the amendments made by this Act shall take effect on the date that is 180 days after the date of enactment of this Act.
The official-actions snapshot updated October 2, 2026, records introduction in the House and referral to the House Committee on Financial Services on September 17, 2026. This snapshot does not establish subsequent legislative action or enactment.
Source snapshot updated 2026-10-02T22:08:52Z. 2026-09-17: Referred to the House Committee on Financial Services. 2026-09-17: Introduced in House
A closer look
Reviewed version: Introduced in House · 2026-09-17. These findings describe provisions and who may benefit; they are not judgments of waste, corruption, or motive.
This review covers the supplied bill text. “None identified” does not rule out provisions in later versions or accompanying reports and disclosures.
Provisions outside the bill’s main subject, or policy changes attached to appropriations.
None identified in the reviewed text
No unrelated provision or policy change attached to appropriations was identified in the complete supplied introduced text. This conclusion does not establish absence in other versions or accompanying materials.
Spending directed to particular recipients or places outside ordinary competitive or formula-based allocation.
None identified in the reviewed text
No congressionally directed spending for particular recipients or places was identified in the complete supplied introduced text. This conclusion is limited to that version and does not establish absence in other versions or accompanying materials.
Narrow exceptions, exemptions, or preferential treatment that warrant a closer look.
Findings to examine
The supplied introduced text contains a narrowly defined regulatory exemption central to the bill's main policy. Classification as a targeted benefit is not a judgment about its merits.
Qualifying privately held, non-carrying brokers and dealers in good standing would receive an exemption from Public Company Accounting Oversight Board audit requirements and could fulfill their annual audit obligation using generally accepted auditing standards. The beneficiary class is narrowed by a maximum of 150 registered people, restrictions on affiliation with an investment advisor that holds customer assets, and the other eligibility conditions.
the exclusion of a non-carrying broker or dealer that is privately held and in good standing from the audit requirements of the PCAOB under title I of the Sarbanes-Oxley Act of 2002, including by providing that such broker or dealer satisfies the broker or dealer’s annual audit obligation under Rule 17a–5 through an audit conducted in accordance with generally accepted auditing standards.
(A) as of the last day of the most recently completed fiscal year of the broker or dealer— (i) has not more than 150 persons registered with an association that is registered as a national securities association under section 15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o–3); and (ii) is not an affiliate (as defined in section 2 of the Bank Holding Company Act of 1956) of an investment advisor that acts as the custodian for customer assets;
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