Sarbanes-Oxley Act (SARBOX, SOX, SOx)
A sweeping corporate financial reform bill passed by Congress and signed
into law by President Bush in July 2002. The Act is a response to a number of
accounting scandals involving several high-profile public corporations, including
Enron and WorldCom. The reforms promulgated by Sarbanes-Oxley are an attempt
to prevent similar abuses in the future and to restore investor confidence that
suffered significantly as a result of these scandals. The key provisions include
requirements that CEOs and CFOs certify their 10-Q and 10-K reports and that
all audit committee members be independent. In addition, the law bans personal
loans to executive officers and directors, prohibits insider trades during 401(k)
blackout periods, requires accelerated reporting of stock trades by insiders,
and mandates more detailed disclosure of off-balance-sheet transactions. Finally,
the law requires that CEOs and CFOs return any profits they obtained as a result
of material misstatements in financial documents and also requires attorneys
working with offending corporations to report violations of the Sarbanes-Oxley
law.
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