H.R. 10477: Small Business Audit Correction Act of 2026

This bill would change audit rules for a narrow group of broker-dealers under the Sarbanes-Oxley Act and related SEC rules.

What changes

It would exclude certain privately held, non-carrying brokers or dealers that are in good standing from some PCAOB audit requirements. In plain terms, that means some smaller securities firms that do not hold customer funds or securities would no longer have to use a PCAOB-audited firm for those particular audits.

Who would qualify

A broker or dealer would have to meet several conditions to count as:

• Privately held: it and its parent/affiliates do not have publicly traded securities registered with the SEC and do not have SEC reporting obligations as public companies.
• Non-carrying: it does not hold customer cash or securities, does not owe those assets to customers, does not carry customer accounts, and does not perform certain custody-type activities.
• In good standing: it must be registered with the SEC, belong to a registered national securities association, meet net capital and indebtedness rules, have no recent relevant SEC enforcement actions, no felony convictions in the last 10 years, no associated persons with certain serious felony convictions, and no recent suspensions, expulsions, or court orders restricting its securities business.

What the SEC would have to do

Within 180 days after the law takes effect, the SEC and the PCAOB would have to update their regulations to reflect the new exemption. The SEC would also have to revise Rule 17a-5 so that these qualifying firms could satisfy their annual audit requirement with an audit done under generally accepted auditing standards, rather than the PCAOB audit framework that applies under Sarbanes-Oxley.

What would not change

The bill says it would not change the requirement that the auditor be qualified and independent under SEC rules. It also would not remove the requirement for these firms to file an exemption report under Rule 17a-5.

When it would take effect

The changes would take effect 180 days after enactment.

Relevant Companies

None found.