Accounting Industry Reform Act
(Sarbanes-Oxley Act of 2002)

July 2002

By Susan B. Hollinger*

Here's a summary of the major reforms established by the new law (HR 3763), signed by President Bush on July 30, with the purpose of improving the accuracy and reliability of corporate disclosures.

• Creates 5-member oversight board for accounting industry with subpoena power under the jurisdiction of the SEC;

• Increases prison terms for executives who commit mail and wire fraud to 20 years;

• Establishes the crime of securities fraud with a maximum sentence of 25 years;

• Chief executives must sign off on their companies' financial statements;

• Restricts accounting firms from engaging in certain consulting work for the companies they audit;

• Prohibits executives and directors from receiving personal loans from their company;

• Extends statute of limitations for shareholder suits from three to five years from the time that a fraud occurred;

• Requires the rotation of audit partners every five years; and

• Creates a restitution fund for defrauded investors funded from fines levied by the SEC.

*Susan B. Hollinger is admitted in New Hampshire and Massachusetts.

Return to top of page

Return to Corporate Governance Resources
Return to Firm Publications