78R5658 DWS-F

By:  Shapleigh                                                    S.B. No. 605



A BILL TO BE ENTITLED

AN ACT

relating to certification and audit of a corporate financial 
report; providing criminal penalties.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Part Five, Texas Miscellaneous Corporation Laws 
Act (Article 1302-5.01 et seq., Vernon's Texas Civil Statutes), is 
amended by adding Article 5.20 to read as follows:
	Art. 5.20.  AUDIT AND CERTIFICATION OF FINANCIAL 
REPORT. A.  In this Article, "financial report" means a balance 
sheet, income or loss statement, cash flow statement, or any other 
presentation of financial information, however denominated, 
concerning a corporation that is intended to portray a significant 
portion of the corporation's financial position.
	B. (1)  Each domestic or foreign corporation doing business 
in this state that is not a public reporting company under Section 
13(a) or 15(d), Securities Exchange Act of 1934 (15 U.S.C. Sections 
78m(a), 78o(d)), as amended, shall certify annually in a filing 
with the State Securities Board that:
			(a)  each financial report prepared by or for the 
corporation:      
				(i)  has been reviewed by the officers 
signing the filing;         
				(ii)  does not contain any untrue statement 
of material fact or omit a material fact necessary to make the 
statements made, considering the circumstances under which the 
statements were made, not misleading; and
				(iii)  fairly presents in all material 
respects the financial condition and results of operations of the 
corporation as of, and for, the periods presented in the report; and
			(b)  the officers signing the filing are 
responsible for establishing and maintaining internal controls and 
have:
				(i)  designed the internal controls to 
ensure that material information relating to the corporation is 
made known to the officers;
				(ii)  evaluated the effectiveness of the 
internal controls as of a date within 90 days before the date of the 
report;
				(iii)  presented in the report the signing 
officers' conclusions about the effectiveness of the internal 
controls based on that evaluation;
				(iv)  disclosed to the corporation's 
auditors all significant deficiencies in the design or operation of 
internal controls that could adversely affect the corporation's 
ability to record, process, summarize, and report financial data;
				(v)  identified for the corporation's 
auditors:                    
					(A)  any material weakness in internal 
controls; and              
					(B)  any fraud, regardless of whether  
material, that involves management or other employees who have a 
significant role in the corporation's internal controls; and
				(vi)  indicated in the report whether there 
were significant changes in internal controls or in other factors 
that could significantly affect internal controls after the date of 
the evaluation, including any corrective actions with regard to 
significant deficiencies and material weaknesses.
		(2)  The State Securities Board may adopt rules to 
administer this section.
		(3)  This section does not apply to a corporation 
without capital stock that is not organized and engaged in business 
for profit.
	C. (1)  An officer or director of a corporation, or another 
person acting under the direction of an officer or director, 
commits an offense if the director, officer, or other person takes 
any action to fraudulently influence, coerce, manipulate, or 
mislead an independent accountant in the performance of an audit of 
a financial report of the corporation for the purpose of making the 
financial report materially misleading.
		(2)  An offense under this section is a state jail 
felony.           
	D. (1)  A corporation subject to this Article or an officer, 
employee, contractor, subcontractor, or agent of the corporation 
commits an offense if the corporation or person discharges, 
demotes, suspends, threatens, harasses, or in any manner 
discriminates against an employee in the employee's terms and 
conditions of employment because of any lawful act by the employee 
to:
			(a)  provide information or otherwise assist in an 
investigation regarding conduct that the employee reasonably 
believes is a violation of this Article; or
			(b)  file, cause to be filed, testify at, 
participate in, or otherwise assist in a proceeding relating to an 
alleged violation of this Article.
		(2)  An offense under this section is a state jail 
felony.           
	E. The Attorney General may conduct an investigation of a 
violation or threatened violation of this Article and may report 
the results of the investigation to an appropriate district or 
county attorney.  On the request of a district or county attorney 
the Attorney General may assist in prosecution of an offense under 
this Article.
	SECTION 2.  This Act takes effect September 1, 2003.