The Dodd-Frank Act Addresses Corporate Governance

By Rashty, Josef | The CPA Journal, April 2012 | Go to article overview

The Dodd-Frank Act Addresses Corporate Governance


Rashty, Josef, The CPA Journal


Internal Controls, Whistleblower Provisions, and Disclosure Regulations

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act includes many provisions that federal regulators, including the SEC, have not yet been able to fully adopt and implement. Although the Dodd-Frank Act focuses mostly on the financial services sector, secondary provisions in the act impact the corporate governance and compliance programs of any nonfinancial publicly held companies.

The Dodd-Frank Act deals with numerous aspects of corporate governance, executive compensation, public company disclosures, and whistleblower procedures and protections, as well as mining and use of certain minerals. These requirements may potentially impact any industry in the United States.

The corporate governance and compliance programs of every publicly held corporation - not just those in the financial sector - may be affected by the following four provisions in the Dodd-Frank Act:

* Exemption from section 404(b) of the Sarbanes-Oxley Act

* Whistieblower rules

* Disclosure requirements for executive compensation in proxies and annual reports

* Disclosure requirements for the use of conflict minerals.

Exemption from Section 404(b) of the Sarbanes-Oxley Act

In response to the Dodd-Frank Act mandate, on September 15, 2010, the SEC issued a final rule, effective September 21, 2010, that public companies with a public float of $75 million or less were exempt from obtaining an independent auditor's report on the effectiveness of their internal control over financial reporting (ICFR) under section 404(b) of the Sarbanes-Oxley Act of 2002 (SOX). This exemption, however, does not extend to management's assessment of the effectiveness of ICFR, which continues to be required under SOX section 404(a).

In addition, on April 22, 2011, the SEC published the results of a study, mandated by the Dodd-Frank Act, that addressed whether it could reduce the costs of compliance with section 404(b) for public companies with a public float between $75 milHon and $250 million. The SEC concluded that "auditor involvement promotes more accurate and reliable reporting" in the assessment of ICFR for publicly held companies; as a result, it found that SOX section 404(b) should continue to apply to such companies.

Whistleblower Rule

On May 25, 2011, the SEC issued a final rule (which narrowly passed by a 3-2 vote) to implement the whistleblower provisions under section 21 F (added by section 922 of the Dodd-Frank Act) of the Securities Exchange Act of 1934. The final rule provides financial rewards for whistleblowers who provide the SEC with "original information" leading to securities law enforcement actions that result in a recovery of more than $1 million.

The Dodd-Frank Act's whistleblower provisions create a system of financial incentives and protections to encourage those with information about possible violations of the securities or commodities laws to submit their complaints directly to the SEC. Whistleblowers can receive between 10% and 30% of any amounts obtained in a successful regulatory enforcement action with sanctions of $1 million or more brought as a result of the tip.

The SEC mandate encourages, but does not obligate, whistleblowers to report the information internally first. In addition to addressing the amount of the awards and the eligibility criteria, the final rule discusses the antiretaliatory provisions of section 21F and the eligibility of whistleblowers who are culpable of misconduct to receive awards.

As part of the Dodd-Frank Act's effort to modify the SEC's authority and operations to better protect the investing community, the SEC created the Office of the Whistleblower (www.sec.gov/whistle blower). This office is responsible for the management and administration of whistleblower programs. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Dodd-Frank Act Addresses Corporate Governance
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.