Professional Documents
Culture Documents
This act has achieved the protection of public from celestial scandals which would have been took place if this act was not set and enforced. This law sets the standards for the public companies which acknowledges the liability and accountability to investors. The SOX is been successful in closing up the loopholes in the prior law, Securities act of 1933. The act of 1933 mainly focuses on the protection of investors from public companies with respect to fraud, misrepresentation, financial transactions etc. Under 1933 act the limitations of putting the standards to small public companies has generated these historical scandals, World Coms and Enron. However the major impact of these scandals have forced the Congress officials to introduce SOX act to keep public investors safe and secure. Even though the private companies are exempt from SOX act, these private companies are encouraged to absorb the SOX act to bench mark their companies standards to the public companies in order to keep themselves competitive. Above all, SOX creates a new generation of benchmark ethical standards and corporate culture. Moreover, this act have succeeded in ensuring the protection of investors through a flexible set of rules. World Coms and Enron are similar in cases: Both companies have committed securities fraud These companies have not followed the ethical standards These companies have fallen down because of their respective CEO and CFO decisions. World Coms and Enron have took advantage of the complex rules under the accounting laws.
World Coms and Enron are different in cases: World Coms is mostly have failed due the top level management decisions to increase revenue however Enron was failed because of its management self-interest for profits.
Private offerings to a limited number of persons or institutions Offerings of limited size Intrastate offerings Securities of municipal, state, and federal governments
The SEC exempts these small offerings to help smaller companies acquire capital more easily by lowering the cost of offering securities to the public. In contrast, SOX provides that publicly traded corporations of all sizes must meet certain specific requirements depending on the size of the corporation. New ammunition for aggrieved investors SOX now gives public companies specific directives as to how financial information offered to the public must be compiled, yet, it stops short of giving investors a right to sue companies privately for failing to meet these standards. Rather, with the exception of SOX Section 306 (dealing with stock trading during pension fund blackout periods), investors must wait for the SEC and Justice Department to bring actions against companies for SOX violations. Investors can't hire their own lawyers to initiate action on their behalf. Although there's no "private right" to sue directly under SOX, shareholders and litigants are in a much stronger position after SOX than under the old federal and state statutes. Prior to SOX, federal and state laws didn't establish
specific standards for corporations in compiling the information they fed to the public in their financial reports. In the event that investors were damaged or defrauded, the investors themselves were responsible for persuading judges the information they had received wasn't truthful or accurate, without reference to any specific standards. Aggrieved investors had only an amorphous body of analogous facts from prior court cases to try to convince courts to apply their specific situation. Now plaintiffs may strengthen their claims and arguments by referencing the standards set forth in SOX.