|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
Piling It On: The Newest Battle To Imply A Private Right Of Action Under Sarbanes-Oxley News
Peter Stone and Jay Gandhi – Recorder
Securities Mosaic. December 21, 2005
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EXCERPT: As a reaction to major corporate scandals such as Enron, Congress enacted securities laws reforms by way of the Sarbanes-Oxley Act of 2002.Sarbanes-Oxley "federalized" certain aspects of corporate governance by requiring reforms and also by empowering the SEC to promulgate related governance rules and regulations. Some of the legislative changes were fairly surgical for example, §301 of the Act set forth specific requirements for public companies to form and maintain audit committees. Other legislative changes, however, were more blunderbuss as an example, §203 swings a broad ax and requires public companies to rotate audit partners every five years regardless of good or bad conduct. At first blush, §304 of Sarbanes-Oxley appears to be of the more specific variety. It requires the CEO and CFO of a public company to prepare an accounting restatement of a required financial reporting due to the material noncompliance of the company, as a result of misconduct, to reimburse the issuer for any company paid bonus, incentive-based or equity-based compensation, or profits from sales of stock of the company, received by them during the 12-month period after that reporting was first filed. A second glance, however, reveals several questions seemingly left unanswered by the statute: What type or level of restatements trigger the statute? What type of misconduct gives rise to the repayment obligation? Does it matter if the misconduct was engaged in by persons other than the CEO or CFO? Is the level of repayment linked to the level of restatement or misconduct? And, who can seek to enforce the statute against the CEO or CFO? Since the statute does not specifically say, is there an implied private right of action for the issuer, or is the SEC the only party that can maintain an action under §304? |
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