Sarbanes-Oxley Act - Seeger Weiss Law Firm

Many types of securities fraud exist including accounting fraud in which public accounting firms report false financial information on behalf of corporate clients. The fallacious reports affect the price of company securities and have hurt investors when such fraudulent practices are exposed. Some notable accounting fraud examples include those involving WorldCom, Tyco International, and Enron. Accounting fraud scandals resulted in passage of the Sarbanes-Oxley Act of 2002 (also known as the Public Company Accounting Reform and Investor Protection Act of 2002), one of the most far-reaching reforms of American accounting business practices and standards.

The legislation was named after United States Senator Paul Sarbanes (D-MD) and United States House of Representative Michael G. Oxley (R-OH), both sponsors of the act approved by the House 334-90 and Senate 99-0. This accounting fraud legislation was already progressing through committees of Congress when WorldCom revealed it had improperly represented its earnings over the previous five quarters. Upon news of the accounting misstatements, both the House and Senate quickly worked out legislative differences and passed the Sarbanes-Oxley Act a month later.

The Sarbanes-Oxley Act addressed a variety of accounting business practices and standards including auditor conflicts of interest where consulting agreements were more lucrative than the auditing engagement. The Sarbanes-Oxley Act spoke to the failures of Board of Directors (specifically Audit Committee members) to exercise oversight of financial reporting on behalf of investors. The Sarbanes-Oxley Act also dealt with the conflict of interest created by securities analysts providing buy or sell recommendations on company securities for which they provided other lucrative banking services. Under this legislation, the Securities and Exchange Commission received increased funding. The Sarbanes-Oxley Act reformed banking lending practices to large corporations, as well as treatment of stock options for executive compensation.

Notable individuals including United States Congressman Ron Paul have criticized the Sarbanes-Oxley Act, while others prominent figures such as former Federal Reserve Chairman Alan Greenspan has praised the legislation. Some have criticized the Sarbanes-Oxley Act’s benefits have been exceeded by costs of compliance. Increased costs have come from the need for strengthened corporate internal and external controls. This cost is disproportionately high for small companies. As a result, some claim that small corporations are more likely to go to less regulated foreign exchanges for trading. Conversely, some claim that companies with increased internal controls have a greater perceived reliability. Such companies are reported to have lower borrowing costs and increased share prices than companies that did not have increased internal controls.

The debate over the costs and benefits of the Sarbanes-Oxley Act will likely become more apparent in time. Regardless, the legislation has brought increased oversight of the accounting practices within corporate environments. The Sarbanes-Oxley Act is a result of the need to reform the accounting practices responsible for negatively affecting the securities owned by investors.

The lawyers at Seeger Weiss LLP seek to assist victims of accounting fraud to receive compensation resulting from corporate securities fraud. Often, such cases lead to class action lawsuits wherein multiple victims are identified. The attorneys at Seeger Weiss LLP possess the resources necessary to expose corporate accounting and securities fraud abuses. If you have potentially been the victim of corporate accounting and securities fraud practices, please contact Seeger Weiss LLP for a free case evaluation.