The Sarbanes-Oxley Act: New Securities Disclosure Requirements in the United States

By Lansing, Paul; Grgurich, Christopher | International Journal of Management, September 2004 | Go to article overview

The Sarbanes-Oxley Act: New Securities Disclosure Requirements in the United States


Lansing, Paul, Grgurich, Christopher, International Journal of Management


In response to the recent onslaught of corporate scandals such as Enron, Arthur Andersen, and WorldCom, the United States Congress passed the Corporate Accounting Practices Act, also known as the Sarbanes-Oxley Act. The primary purpose of this Act was to formalize and strengthen the rules governing those individuals and firms within the Securities industry who play a role within U.S. capital markets. Through the following analysis of the Sarbanes-Oxley Act and related SEC releases, foreign private issuers will better be able to comply with new U.S. securities law measures.

I. Introduction

Admist the recent onslaught of corporate scandals rocking such giants as Enron, Arthur Andersen, and WorldCom, a debate was sparked concerning much needed reform in United States securities laws. On July 30, 2002, the United States Congress passed the Corporate Accounting Practices Act, also known as the Sarbanes-Oxley Act (the '"Act"). The primary purpose of this Act is to formalize and strengthen the rules governing corporate officers, accountants, lawyers, and those individuals and firms within the securities industry who play a function within U.S. capital markets. As drafted, the Act poses broad-reaching implications for each of these groups. Importantly, the Act itself does not distinguish between foreign (non-U.S.) and domestic securities issuers.

During the months following the passage of the Act and continuing through today, the Securities and Exchange Commission (SEC) has released and adopted several important provisions interpreting controversial sections of the Act as the provisions relate to foreign issuers. This article contains an analysis of the Sarbanes-Oxley Act ("the Act") and SEC releases interpreting various portions of the Act as the provisions relate to listed foreign private issuers. It should be noted, however, that this article does not address all potential concerns created by the Act as applied to listed foreign private issuers. For a complete breakdown and analysis of the new rules, foreign private issuers should consult counsel for proper advice in meeting the new securities law requirements.

Rapidly constructed, the Sarbanes-Oxley Act was created to stifle shaken investor confidence in American stock markets. Realizing that a stock market is a system comprised in part of public issuers, individual and private institutional investors, attorneys, accountants, and analysts, the U.S. legislature broadly drafted the Act to reregulate each of these groups in ways designed to holistically bring investor confidence back to the marketplace. Of the numerous groups regulated by the Act, listed private issuer officers and directors face the most dramatic changes in their corporate responsibilities under the new U.S. securities laws.

The Act is composed of eleven chapters. Though the SEC and various stock market exchanges have since drafted and adopted several thousands of pages of rules interpreting various provisions of the Act. the key to a manager's basic understanding of new disclosure requirements stems from a thorough analysis of the basic provisions set forth in the Act and subsequent SEC interpretations of these provisions.

II. Framework of the Act

The Act attempts to rebuild investor confidence in public issuer management with a two pronged approach consisting of internal and external monitoring procedures coupled with significantly heightened penalties placed upon senior corporate officers failing to comply with the Act's requirements.

A. Internal Control: Creation of an Audit Committee

Beginning with the internal approach, the Act requires a corporation to establish a corporate auditing committee whose function is to act as the sole link between management and outside public auditors. In the past, when public auditors raised questions, they were chiefly required to seek out key management personnel for needed answers. As a result, management, perhaps directly responsible causing the accounting irregularities, was in the unique position to shape and bias information available to the auditor resulting in "Enron - like" tragedies. …

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 Sarbanes-Oxley Act: New Securities Disclosure Requirements in the United States
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.