What are the basic provisions of the Sarbanes -Oxley Act? |
• Rule 404 requires each company to adopt effective financial controls. • CEOs and CFOs must personally certify their company’s financial statements. These officers are subject to criminal penalties for violations. • All members of a board’s audit committee must be independent. • A company cannot make personal loans to its directors or officers. • If a company has to restate its earnings, its CEO and CFO must reimburse the company for any bonus or profits they have received from selling company stock within a year of the release of the flawed financials. • Each company must disclose if it has an ethics code and, if it does not, why not. • It is a felony to interfere with a federal investigation into fraud. • Whistle-blowing employees are protected. • A new Public Accounting Oversight Board has been established to oversee the auditing of public companies. |
What are the rights of shareholders? |
• Right to information • Right to vote • Right to dissent • Right to protection from other shareholders • Right to monitor |
What recourse do shareholders have against corporations if shareholder rights are violated? |
Shareholders are permitted to sue the corporation directly only if their own rights have been harmed. |
What are the key provisions of the Securities Act of 1933? |
The 1933 Act requires that, before offering or selling securities, the issuer must register the securities with the SEC, unless the securities qualify for an exemption. |
What are the disclosure requirements of the Securities Act of 1933? |
Elaborate registration statements; audited financials: • An initial, detailed information statement when the company first registers (similar to the filing required under the 1933 Act) • Annual reports on Form 10-K, containing audited financial statements, a detailed analysis of the company’s performance, and information about officers and directors • Quarterly reports on Form 10-Q, which are less detailed than 10-Ks and contain un-audited financials • Form 8-Ks to report any significant developments, such as bankruptcy, a change in control, a purchase or sale of significant assets, the resignation of a director as a result of a policy dispute, or a change in auditing firms |
How did Sarbanes-Oxley change the disclosure requirements of the Securities Act of 1933? |
It requires each company’s CEO and CFO to certify that: • The information in the quarterly and annual reports is true, • The company has effective internal controls, and • The officers have informed the company’s audit committee and its auditors of any concerns that they have about the internal control system. |
Sarbanes-Oxley Act
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