The Sarbanes-Oxley Act of 2002
On July 30th 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. The Act is a response to recent accounting issues that have arisen at large public companies and the subsequent calls for legislation to prevent the recurrence of these types of issues. The Act seeks to promote corporate responsibility by, among other things, creating a new oversight board for the accounting industry, requiring faster and more extensive financial disclosure, imposing new restrictions on accounting firms and research analysts, placing new corporate responsibilities on executives and attorneys, and imposing stiffer criminal and civil penalties for corporate wrongdoers. The law also extends the statute of limitations for shareholders to bring securities fraud actions. This law applies to publicly owned U.S. companies as well as to foreign issuers ("Companies"). The new law will not apply retroactively. Cases against Enron, WorldCom, Adelphia and Tyco, for example, will be filed under the laws that existed when the alleged violations took place.
Several key provisions of the Act overlap with corporate governance reform proposals of the New York Stock Exchange ("NYSE") and the NASD, as well as the recent Securities and Exchange Commission ("SEC") rule proposals to enhance corporate disclosure.
This alert explains some of the key provisions of the new law that will have an impact on Companies and their top executives. The complete text of the Act is available Here