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Carrot And Stick: Understanding The SEC’s Agenda

Lawrence Byrne and Joseph Armao | November 30, 2004

Corporate boards and management have had to scramble to understand and implement the new rules under the Sarbanes-Oxley Act. Yet, as far-reaching as the changes Congress has made are, an even bolder agenda may be taking shape at the Securities and Exchange Commission.

Recent developments indicate that the Commission is conducting investigations of corporate fraud, not simply to punish wrong-doers, but also as a way of completely re-engineering the ethical code by which public companies, their managers and the directors abide.

This is evident from the increasingly large civil penalties the SEC has been meting out recently, reaching an all-time high in late October when it imposed a fine of $250 million against Qwest Communications, as well as the Commission’s ever-expanding probes into the business practices of a wide variety of industries, from mutual funds to energy reserves.

The fact that many of these practices have long been...

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