A US federal law that set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It is named after Paul Sarbanes and Michael Oxley. As a result of SOX, top management must now individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe.
The bill was enacted as a reaction to a number of major corporate scandals including those affecting Enron, worldcom etc. These scandals, which cost investors billions of dollars when the share prices of affected companies collapsed, shook public confidence in the securities market.
The act contains 11 titles, or sections, ranging from additional corporate board responsibilities to criminal penalties.
It mandates that senior executives take individual responsibility for the accuracy and completeness of corporate financial reports.
SOX enhanced corporate transparency, which eventually led corporates’ to hold earnings calls.
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