The Sarbanes-Oxley Act of 2002 requires new disclosures for officers and directors of publicly traded companies. Controls regarding securities fraud, criminal and civil penalties for violating the securities laws, blackouts for insider trades of pension fund shares, and the protections for corporate whistleblowers have become forefront in the Acts creation of safeguarding the general public’s rights.Title IX of the Sarbanes Oxley Act enhances the white collar crime laws and regulations to deter corporate criminal activity for shareholder protection and economic vitality. The enhancements to the penalties are important to understand for several reasons, but the most important being is what could occur to your own company’s officials if they decide to meander to the “dark side”.
Section 902: States any person who attempts or conspires to commit an offence dealing with fraudulent acts of various types will face the same penalties as those who have provided for the offence, and was the object of the attempt and/or the conspiracy.
Section 903: Increases the prison term upon conviction for mail or wire fraud from five years to twenty years.
Section 904: Raises the maximum criminal penalties for anyone willingly violating Title 1, subtitle B, part 1 of ERISA. Offenders face a maximum fine of $5,000 and a maximum term of imprisonment of 1 year, or both. Under the new language of this provision, organizational defendants will be subject to an increased fine level raised from $100,000 to$500,000. The increased maximum imprisonment term changes the offence from a misdemeanor to a felony.
Section 905: Allows the U.S. Sentencing Commission to review and amend (within 180 days) of the offence any portion of the sentencing guidelines ensuring it reflects the seriousness of any crime under the Act. In other words, the penalties will be harsher than stated if need be in the future.
- Section 906: States anyone who willingly certifies compliance issues knowing that the periodic report accompanying the statement does not reflect the data will face a fine of up to $5 million and up to 20 years imprisonment or both.
The Sarbanes-Oxley Act has been described as one of the harshest securities legislation to be passed since the Securities Act of 1933 and the Exchange Act of 1934, which were passed in the aftermath of the stock market crash of 1929. The barriers to corporate fraud may have been increased slightly, yet the economic impact is difficult to decipher due the newness of the Act.
Will the increased imprisonment terms and fines deter corporate malfeasance, or will the chieftains of publicly traded companies view the increased penalties as “minor” details to the billions of potential dollars that may be gained? This commentator’s personal opinion is that the fines/penalties are minimal when weighing the costs of inflation in the past 70+ years with the scrutiny of the financial industry since 1933/1994.
Do we have any economist amidst our readings to run the mathematics? I am certain moving a penalty from $100,000 to $500,000 in 7 decades calculating inflation is a penny in the bucket.
Article was written in June 2008
Dr. Melissa Luke is a practitioner in the financial and securities markets, specializing in maintaining positive economic conditions within domestic and international organizations for maximum profitability.
Dr. Luke has directly worked with top agency authorities such as the Securities and Exchange Commission (SEC), the National Association of Securities Dealers (NASD), and the Public Company Accounting Oversight Board (PCAOB) to increase knowledge base for university students and business owners nationwide.
She assists leaders in maintaining corporate vitality and economic growth within an organizations strategic structure and shareholder realm.
Melissa was a professional guest speaker, conducting seminars nationwide and in Canada on market makers, electronic control networks, arbitrage, Level II systems, technical approaches, and crisis prevention methods for corporate securities and welfare, and the Sarbanes-Oxley Act of 2002.
She has published securities educational methods for global distribution, and has worked with several foreign governments on securities issues.
Dr. Luke beta tested the primary software systems used for many of the major brokerage houses and online trading entities prior to the inception and implementation to the general public. She also trains all levels of organizations and corporations on the identification process of corporate malfeasance and fraudulent activity, to protect the corporate executives and public shareholders.
She educates 21st Century organizations, investigates wrongdoing, conducts extensive research on the intricacies of the Sarbanes-Oxley Act, and recruits knowledgeable professionals on the requirements of compliance of corporate fraud utilizing her prior experience working for the United States Treasury.
Currently, Dr. Luke analyzes corporate legal entities, methods of operation, systems, internal controls, employee management, ownership, and corporate structure to maximize profitability and provide recommendations to improve ease of operation, productivity, and profitability of small to medium sized business in the United States.
She also teaches undergraduates at Boise State University as an adjunct professor in management and doctoral students at North Central University in finance.
Growth in women's share of science, technology, engineering and mathematics (STEM) occupations declined to 27% in 2011from a high of 34% in 1990. While women make up nearly half of the workforce, they were 26% of the STEM workforce in 2011.
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