SOX - Sarbanes-Oxley Act
After highly-publicized scandals at Enron, Global-Crossing, and WorldCom, widespread investor mistrust of corporate management inspired a Congressional response: the Corporate and Criminal Fraud Accountability Act of 2002, a/k/a the Sarbanes-Oxley Act (“Sarbanes-Oxley” or “SOX”) which became the law of the land on July 30, 2002. This sweeping legislation addresses a number of issues of critical importance to public companies. Among its many provisions are ones establishing new disclosure requirements applicable to companies and their CEOs and CFOs, restricting certain executive officer and director transactions and accelerating Section 16 reporting, imposing new obligations on corporate audit committees, establishing a new regulatory body to oversee public company auditors and redefining the relationship between auditors and their clients, imposing new rules of professional responsibility on attorneys and securities analysts, and enhancing a variety of criminal penalties and enforcement measures for securities-related offenses. In addition, the Act requires the Securities and Exchange Commission (“SEC”) to study and issue reports on a variety of topics.
Entities covered under Sarbanes-Oxley include not only those companies whose stocks trade publicly, but also all registered foreign companies and all non-public companies whose debt securities are publicly traded, whose equity or debt securities are registered under the Securities Exchange Act, who are required to file reports under that Act, or who have filed a statement for a public offering under that Act. Coverage also extends to any officer, employee, contractor, subcontractor or agent of a covered entity. As a result, non-public companies who are contractors or subcontractors of a public company, are “covered entities” subject to SOX obligations and proceedings.
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