Facts

• President Bush signed the act into law in July 2002. The House approved the act with only three votes in opposition, while the Senate vote in favor was unanimous. The act introduced major changes to the regulation of financial practice and corporate governance. The act also attempted to protect both current and future investors by improving the accuracy and reliability of corporate disclosures. Corporations and their executives are required to comply with the act.
  
  

History

• The House of Representatives passed the Oxley bill in April 2002, put forth by Rep. Michael G. Oxley, R-Ohio. During the same time period, Sen. Paul Sarbanes, D-Md., presented a similar bill to the Senate Banking Committee, which was passed by a majority. After both proposals were passed, they were combined into the Sarbanes-Oxley Act. The Sarbanes-Oxley Act is also commonly known as the Public Company Accounting Reform and Investor Protection Act.
  
  

Significance

• The Sarbanes-Oxley Act is the most significant change to federal securities laws since the New Deal, according to Tech FAQ. The act allows for the discovery of information about transactions or the material misrepresentations contained therein. The act further allows for the identification of errors or potential fraudlent transactions. The act holds corporate executives more responsible for intentionally defrauding investors by instituting more severe penalties. Increased jail times and fines are designed to deter executives from illegally misleading current and future investors.
  
  

Benefits

• The Sarbanes-Oxley Act forces companies to comply with financial reporting regulations, insider trading disclosure and mandatory internal audits to protect potential investors. According to Discover the Hidden Benefits of Sarbanes-Oxley, smart corporate leaders are using compliance with the act to foster the growth of their businesses. Executive compliance is forcing companies to purchase system upgrades which, in turn, is allowing them to stay ahead of the competition.
  
  

Potential

• The future of the Sarbanes-Oxley Act will depend entirely on a corporation and its executives. According to Tech FAQ, corporations will not only need to incorporate and comply with the act and its provisions but must also make it a part of their everyday activities. Businesses will need to thoroughly train and educate their employees to ensure they remain compliant with the act. Businesses will also need to incorporate and maintain effective and efficient processes for monitoring and reporting. Because compliance is mandatory and penalties are stiff, the act's future shows promise.