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Sarbanes-Oxley Act

Sarbanes-Oxley is a United States federal law enacted on July 30, 2002 in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of the affected companies collapsed, shook public confidence in the nation's securities markets. The legislation came into force in 2002 and introduced major changes to the regulation of financial practice and corporate governance. Named after Senator Paul Sarbanes and Representative Michael Oxley, who were its main architects, it also set a number of deadlines for compliance.
The Sarbanes-Oxley Act is arranged into eleven titles. Title I: Public Company Accounting Oversight Board (PCAOB) which provides independent oversight of public accounting firms providing audit services. Title II: Auditor Independence establishes standards for external auditor independence, to limit conflicts of interest. Title III: Corporate Responsibility mandates that senior executives take individual responsibility for the accuracy and completeness of corporate financial reports. Title IV: Enhanced Financial Disclosures describes enhanced reporting requirements for financial transactions, including off-balance-sheet transactions, pro-forma figures and stock transactions of corporate officers. Title V: Analyst Conflicts of Interest includes measures designed to help restore investor confidence in the reporting of securities analysts. It defines the codes of conduct for securities analysts and requires disclosure of knowable conflicts of interest. Title VI: Commission Resources and Authority defines practices to restore investor confidence in securities analysts. It also defines the SEC’s authority to censure or bar securities professionals from practice and defines conditions under which a person can be barred from practicing as a broker, adviser or dealer. Title VII: Studies...