Regulatory Requirements
Regulatory Requirements
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Regulatory Requirements
What were the national events surrounding the implementation of the SEC and SOX?
There have been specific events that have led to the passage of the Sarbanes-Oxley Act. In America, there was a time during the mid 1990’s whereby the economy flourished. As a result, of the drastic changes affecting the economy, the stock market became noticed by Americans. Furthermore, the averages of stocks rose all the way to the years of early 2000. The people who gained most were those who had invested in IPO’s as they were referred to as the economies ‘dot.com’ sector. There were many other events that lead many Americans to invest their money in the stocks market. They include; people becoming more aware of the importance of retirement accounts that were self directed and information technology explosion. Also, other reasons are the involvement in equity investing culture as well as communications (Donaldson, 2003).
As the 2000 second quarter began, trouble began to occur as the prices of stocks plummeted and in turn, investors withdrew from the market. This means that the IPO market no longer existed, and stories such as that of Enron started to unfold in the year 2000. It was reviled that, during the years of boom, there were numerous cases of business principle erosions, misconduct, as well as fraud. Big names that were involved in the scandals included Adelphia, Tyco, and WorldCom, among others. Lastly, there was a quarter-to-quarter earnings obsession in the corporate America. It was influenced by the temptation to ensure that corporate insiders received many stock options. Corporate America had put more emphasize on ‘hitting the number’ rather than improve stock performance. In turn, some managers often forged their financial results to meet the expectations of the corporate world. This is what led to the SOC and SEC implementation by President George Bush (Donaldson, 2003).
Briefly explain the 3 responsibilities of the SEC and 3 components of SOX
The Securities and Exchange Commission seeks to ensure that capital formation is facilitated, there are efficient, orderly, fare markets, as well as investors are protected. It is vital that SEC protects new investors in the market who want to able to manage their futures in any way possible. There is a need for a market regulation that is sound, in order to cope with America’s global competitors in terms of security exchanges. As a result, of the economy growth, standards of living have improved, and jobs have been produced. This means that SEC has the responsibility of sustaining the capital formation as well as the growth of the economy. SEC ensures that the public has knowledge of financial information derived from public companies. Therefore, investors have sufficient information regarding certain securities in the market. Furthermore, SEC works in union with key participants in the market such as the investors. Lastly, SEC has the responsibility of ensuring that mutual fund, investment advisors, security brokers, among others are protected from fraud and engage in fair dealings (Donaldson, 2003).
The 2002 Sarbanes-Oxley Act is meant to ensure that reliable and accurate corporate disclosures exist as a way of protecting investors. Furthermore, the Act has introduced new penalties for those who commit wrongs and has improved corporate accountability standards. There are three SOC components, and they include; strengthening and formalizing internal balances and checks. The latter are within the nation’s institutions and corporate levels that facilitate sign-off and control. Lastly, SOC seeks to ensure that full transparency exists as a result of financial reporting exercises that promote corporate governance and full disclosure. Moreover, if SOC will succeed; it should audit, trace and document changes that affect its reporting structure (Shakespeare, 2008).
Do you feel these were adequate solutions to the situations at the time of their implementation?
In my opinion, as a result of the implementation of the SOC and SEC, key accomplishments were made within a short time. Since deadlines had been created, it was possible to ensure that the 15 different project rule makers worked towards making sure that provisions of the Acts were implemented. Moreover, various stakeholders were given the opportunity by the Commission to put forward their proposals concerning this issue. The professionals from the corps sector, as well as the commissioners were dedicated while trying to implement the Act. The tools used in the Act could effectively deal with deterring wrong doers as well as corporate fraud. Therefore, many American investors were protected against fraud as those involved in corruption were punished.
A lot of progress has been witnessed as the cases of reporting violations and financial fraud have been many. Also, some of the leading and notable corporate directors and executives have been charged. The American capital markets are today flourishing due to the Sarbanes-Oxley Act reforms. Moreover, foreign and domestic reporting countries and their directors and officers have been affected by the Act. It is quite evident that the Act’s far reaching goals are being met, due to the integrity and investor confidence in American markets. The solutions were quite beneficial in making sure that the situation at the time improved (Donaldson, 2003).
References
Donaldson, William. (2003). Testimony concerning Implementation of the Sarbanes-Oxley Act of 2002. U.S. Securities and Exchange Commission. Retrieved from HYPERLINK “http://www.sec.gov/about/whatwedo.shtml” http://www.sec.gov/about/whatwedo.shtml
Shakespeare, Catharine (2008). “Sarbanes–Oxley Act of 2002 Five Years On: What Have We Learned?” Journal of Business & Technology Law, 333.
