Sarbanes-Oxley Act of 2002 - SOX

(1) (Schema for Object-oriented XML) An XML schema developed by Veo Systems and Muzino Communications, which was submitted to the W3C. SOX is based on DTD, but adds data typing and reuse mechanisms. In May 2001, a standard XML schema (W3C XML Schema) was introduced by the W3C. See XML schema. See also SOCKS server.

(2) (Sarbanes-OXley Act) Administered by the Securities and Exchange Commission (SEC) in 2002, SOX regulates corporate financial records and provides penalties for their abuse. It defines the type of records that must be recorded and for how long. It also deals with falsification of data. Affecting data storage capacities and planning, SOX was enacted after the Enron and WorldCom scandals of the early 2000s. The bill was sponsored by Paul Sarbanes, Democratic Senator from Maryland and additionally authored before passage by Michael Oxley, Republican Senator from Ohio.

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An act passed by U.S. Congress to protect investors from the possibility of fraudulent accounting activities by corporations.

Investopedia Says:
The rules and enforcement policies outlined by the SOX Act amend or supplement existing legislation dealing with security regulations. The basic outline is as follows:

1. Establishment of a Public Company Accounting Oversight Board, where public companies must now be registered.

2. Strict auditor regulation and control by means of auditing committees and inspecting accounting firms.

3. Heightened corporate responsibility for any fraudulent actions taken.

4. Stricter disclosure within company financial statements, and ethical guidelines to which senior financial officers must adhere.

5. Guidelines for analyst conflicts of interest.

6. Authorities available to the Commission and the Federal Court, as well as required broker and dealer qualifications.

7. Enforcement methods available for punishment of activities deemed criminal by the Act.

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Known also as the Corporate Responsibility Act of 2002, signed July 30, 2002 in the wake of Enron and other accounting and corporate governance scandals, introducing radical reforms in four key areas:

Corporate Responsibility: Requires CEOs and CFOs to certify financial reports and forfeit profits and bonuses from earnings restated due to securities fraud; prohibits executives from selling company stock during blackout periods; requires insiders to report company stock trades within two days; prohibits company loans to executives not available to outsiders; requires immediate disclosure in "plain English" of material changes in company's financial condition.

New Criminal Penalties: Creates a new crime with 20-year prison term for destroying, altering, or fabricating records in federal investigations, or any "scheme or artifice" to defraud shareholders; raises maximum penalty for securities fraud to 25 years; increases CEO, CFO penalties for false statements to SEC or failing to certify financial reports to $5 million fine, 20-year prison term; requires key audit documents and e-mail be preserved for five years and creates a 10-year felony for destroying such documents; raises maximum penalties for mail, wire fraud to 20 years, for defrauding pension funds to 10 years.

Accounting Regulation: Establishes a five-member oversight board with investigative and disciplinary powers that is majority independent, funded by publicly held companies, and overseen by SEC; curtails consulting services by auditors to clients in nine categories; requires accounting firms to rotate lead or reviewing partners from client assignments every five years.

New Protections: Extends statute of limitations on securities fraud to five years, or two from discovery; liberalizes whistle-blowers' abilities to sue and prove retaliation; prohibits investment firms from retaliating against analysts who criticize firm's clients; directs civil penalties from SEC enforcement actions to accounts that benefit victimized investors; increases SEC budget by $776 million for fiscal 2003; prevents officials facing fraud judgements from taking refuge in bankruptcy.

Federal law enacted in 2002 that introduced major reforms in corporate governance and financial reporting. The act (also called the Corporate Responsibility Act) is regarded as the most sweeping securities legislation since the Securities and Exchange Act of 1934, which established the Securities and Exchange Commission and federal regulation of the securities industry. Among its provisions, Sarbanes-Oxley established an independent five-member watchdog agency, the Public Company Accounting Oversight Board (PCOAB), to oversee audits of public company financial statements; required corporate financial officers to certify accuracy of financial statements; required public companies to certify in annual reports the effectiveness of internal controls on financial reporting; banned corporate loans to executives and directors; and required companies to have procedures for handling whistleblower complaints concerning questionable accounting or auditing practices.

(www.sarbanes-oxley.com) wide-ranging U.S. Corporate reform legislation, coauthored by the Democrat in charge of the Senate Banking Committee, Paul Sarbanes, and Republican Congressman Michael Oxley. The Act, which became law in July 2002, lays down stringent procedures regarding the accuracy and reliability of corporate disclosures, places restrictions on auditors providing non-audit services, and obliges top executives to verify their accounts personally. Each issuer's annual report must include an internal control report containing an assessment of the effectiveness of the internal control structure and procedures.