After a remarkable political turnaround, President George Bush signed into law July 30 the Sarbanes-Oxley Act of 2002. The bill was drafted in response to the corporate accounting scandal, was an amalgam of separate bills sponsored by Senator Paul Sarbanes (D-MD), chairman of the Senate Banking Committee, and Rep. Joseph Oxley (R-OH), chairman of the House Financial Services Committee, and eventually passed both houses of Congress by near-unanimous margins.
The President initially favored a less sweeping overhaul of the laws and regulations affecting corporate accounting, conflicts of interest among securities analysts, and public company earnings reports, proposals that he delivered in a speech on July 11 in New York. Eventually, however, he signed a bill that more closely tracked the Democratic approach to stanching future shenanigans by corporate auditors and executives.
Following are some highlights of the law provided through the courtesy of John Baker, an attorney with Stradley, Ronon, Stevens & Young in Washington, D.C.
For a PDF version of the law itself, provided by FindLaw.com, click here (www.investmentadvisor.com/links/sarbanesoxley072302.pdf).
For Mr. Baker’s entire precis of the law, and for other links related to the formulation of and debate over the law, click here http://groups.yahoo.com/group/FundLaw/message/627.
The Sarbanes-Oxley Act is most notable for its substantial federalization of public company accounting practice and standards. The Act also creates or substantially increases criminal penalties for white collar crimes, enhances corporate governance and reporting obligations, and imposes federal ethical responsibilities on securities lawyers. Selected provisions of the Act are outlined below.
Public Company Accounting Oversight Board
The Act creates a five-member Public Company Accounting Oversight Board to oversee audits of public companies. The Board is to have five members, of whom two are to be certified public accountants.