On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (“the Act”), which immediately impacts publicly-traded companies, as well as public accounting firms, lawyers and securities analysts. The Act–passed in the wake of unparalleled financial disclosure and corporate integrity crises in large public companies such as Enron, WorldCom, Adelphia, Tyco and Global Crossing, and as many other publicly-traded companies are restating their financial statements as a result of possible “accounting irregularities”–purports to provide protection for shareholders. This legislation is unprecedented in the last 60 years for its breadth and effect on corporate disclosure, corporate governance and the public securities markets.
Whenever the Government sends such a clear and sweeping message about its expectations, corporate managers, boards and executives of publicly-traded and privately-held companies committed to high standards of corporate integrity should evaluate their compliance and record-keeping practices to comport with the new law. Some of the provisions of the Act are effective immediately, while others require the SEC to adopt relevant rules within specified periods, ranging from 30 days to one year.