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SOX: An uneven legacy

Thomas Quaadman | March 13, 2018

In 2002, Congress passed the Sarbanes Oxley Act (“SOX”) in response to the accounting scandals at Enron and WorldCom. This legislation represented a major transformation of the federal role in financial reporting and corporate governance. While strong policies have been implemented, the persistent rush for the exits by public companies and the failure to create new public companies persists. This has been a drag on the American economy.

From the New Deal until SOX, corporate governance was structured under state law, while financial reporting was a mix of federal and state law as well as private sector oversight. With some exceptions, federal securities laws were a disclosure-based regime, giving investors access to material information needed to make informed investment decisions.

SOX gave birth to a new era of direct federal regulation and intervention. This legislation established the Public Company Accounting Oversight Board, under the auspices of the Securities...

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