Sarbanes-Oxley Act

Applies to publicly traded companies, introduced major changes to the regulation of corporate governance and financial practice. To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.

The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with all its stakeholders.

SEC regulates publicly held corporations and requires them to provide extensive financial data to the shareholders. Model Act also gives shareholders right to inspect and copy information.

Shareholders rights to receive information and vote on proposals by the board.

(1) Right to information- minute book, accounting records, and shareholder lists. (2) Right to vote- must have at least one class of stock with voting rights. (3) Right to dissent- private corp makes a fundamental change- must buy back stock of those who object a fair value. (4) Right to Protection from other Shareholders- protection against majority. (5) Right to Monitor- Receive information and vote.

Derivative lawsuit- to remedy wrong to the corporation. Also can file a class action suit.

Regulate the issuance of new securities. Established the Securities and Exchange Commission (SEC). Creates laws in three ways: Rules, Releases, and No-action Letters. Power to issue "cease and desist orders". The act requires sellers to register with the SEC.

(1) Information statement when company registers. (2) Annual reports on form 10-k. (3) Quarterly reports on Form 10-q. (4) Form 8-ks.

CEO/CFO must certify that the information is true, company has effective internal controls, and committee is aware of concers about internal control system.

Unqualified opinion- clean. Qualified opinion- unresolved issue. Adverse opinion- do not accurately reflect practice. Disclaimer of opinion- not enough information.

Created regulations for auditors to comply. Established the Public Company Accounting Oversight Board to ensure that investors receive accurate and complete financial information.