- Enacted 30 July 2002
- In response to several corporate and accounting scandals (Enron)
- Applies only to publicly traded companies.
- Established the Public Company Accounting Oversight Board (PCAOB)
- Provides independent oversight of public accounting firms providing audit services.
- Mandates that senior executives take individual responsibility for the accuracy and completeness of corporate financial reports.
- Defines the Security Exchange Commission's (SEC) authority to censure or bar securities professionals from practicing as a broker, advisor or dealer.
- Increases the criminal penalties associated with white-collar crimes and conspiracies.
- Requires management and the external auditor to report on the adequacy of the company's internal control over financial reporting.
Cost/Benefit
http://www.section404.org/pdf/Lord%20&%20Benoit%20Report%20Do%20the%20Benefits%20of%20404%20Exceed%20the%20Cost.pdf
http://www.foley.com/news/news_detail.aspx?newsid=3074
Analysis
- Major criticism points to the cost of implementing this law in comparison to the benefit.
- Studies show that SOX disproportionately effects expenses for smaller companies.
- Studies indicate that SOX inhibits companies from being traded in the United States markets.
- An unusually large number of companies de-listed themselves from the NYSE after the law was passed.
- The number of Initial Public Offerings (IPOs) has decreased since the passing, but given other economic conditions, it is unclear to what extent SOX has on this.
- Proponents of the measure site increased investor confidence through the enhanced financial transparency.
[More to follow]
