The objective of the following article is to comment on the Sarbanes-Oxley Act of 2002 (“Act”) from a transatlantic point of view and to discuss its effects on foreign companies as far as theoretical or practical impacts are already visible at this early stage.
It is an attempt to show the compatibility of the Act with other legal systems, especially with the existing German regulations.
It is not the goal of this paper to point out the important changes regarding requirements in general.
In a first section (I) the author wants to describe briefly the reasons for enacting the Act and to present the problems that occur with some of the regulations contained therein.
In a second step (II), the author will outline the Act’s impacts on German and other European legal systems.
In a final conclusion (III) the author wants to use the “holdings” he worked out in the second part to discuss the reform and criticize some aspects of the Act in an international light.
Table of Contents
Structuring
I. Introduction
1. Context of the Sarbanes-Oxley Act
2. Presentation of the Topic
II. Impact of the Act on Foreign Companies
1. Applicability to Foreign Firms
2. Compatibility with German Law
III. Conclusion
1. Criticism
2. Suggestions
3. Closing Words
Objectives and Topics
This paper examines the Sarbanes-Oxley Act of 2002 from a transatlantic perspective, specifically analyzing its theoretical and practical impacts on foreign companies. The primary goal is to evaluate the compatibility of the Act's stringent new corporate governance and auditing requirements with existing legal systems, such as German law, and to discuss the resulting international regulatory conflicts.
- Legislative context of the Sarbanes-Oxley Act in response to US business scandals.
- Applicability of the Act to non-U.S. issuers and foreign accounting firms.
- Comparative analysis of U.S. requirements versus German legal standards (§ HGB, AktG).
- Identification of international conflicts of law and regulatory challenges.
- Policy suggestions for resolving compliance risks for multinational enterprises.
Excerpt from the Book
1. Context of the Sarbanes-Oxley Act
On July 30, 2002, the President of the United States of America, George W. Bush, signed into law H.R. 3763, known as the “Sarbanes-Oxley Act of 2002 (the “Act”).
The Act reflects a Congressional response to a series of highly publicized business scandals, earnings restatements, pension losses and bankruptcies that have been headlines, not just in business journals but also in all the daily newspapers over the past months.
The Act aims to prevent the practices, which have been disclosed, by setting new corporate governance standards, adding new disclosure requirements and increasing the criminal penalties for violations of the securities laws and creating a strong auditor oversight board. Many provisions of the Act remain subject to the rulemaking of the Securities and Exchange Commission (“SEC”).
Summary of Chapters
Structuring: An introductory overview outlining the organizational structure of the paper.
I. Introduction: Presents the motivation behind the paper, focusing on the transatlantic view of the Sarbanes-Oxley Act and its compatibility with non-U.S. legal systems.
1. Context of the Sarbanes-Oxley Act: Details the historical origin of the Act as a legislative reaction to major U.S. corporate scandals and failures.
2. Presentation of the Topic: Explains the scope of the Act, clarifying that its provisions extend to both U.S. and non-U.S. issuers registered under the 1934 Exchange Act.
II. Impact of the Act on Foreign Companies: Examines how the new governance and accounting changes affect businesses operating outside the United States.
1. Applicability to Foreign Firms: Discusses the "omni-applicability" of the Act, which subjects foreign public accounting firms to the oversight of the new Board.
2. Compatibility with German Law: Compares specific U.S. regulatory demands, such as internal control testing, against German legal frameworks like the HGB and AktG.
III. Conclusion: Synthesizes the findings to critique the Act’s lack of coordination with international law.
1. Criticism: Argues that the Act creates conflicts for foreign firms and ignores the sovereignty of other legislative systems.
2. Suggestions: Proposes potential solutions through SEC exemptions or political coordination between the EU and the U.S.
3. Closing Words: Reflects on the necessity of harmonizing global corporate law to protect investors effectively without causing legal insecurity.
Keywords
Sarbanes-Oxley Act, Corporate Governance, Foreign Companies, SEC, PCAOB, German Law, HGB, Investor Protection, Audit Reports, International Law, Compliance, Financial Scandals, Disclosure Requirements, Internal Controls, Corporate Responsibility.
Frequently Asked Questions
What is the primary focus of this paper?
The paper focuses on the Sarbanes-Oxley Act of 2002, specifically evaluating its impact on foreign companies and its compatibility with international legal systems, with a particular emphasis on German law.
What are the central themes addressed in the text?
The central themes include corporate governance reform, the extraterritorial applicability of U.S. law, the role of auditor oversight, and the regulatory conflicts between American and European legal standards.
What is the main objective of the author's research?
The objective is to comment on the Act from a transatlantic perspective and identify potential legal conflicts that foreign companies face when complying with these new, stringent requirements.
Which methodology is used to analyze the Act?
The author uses a comparative legal analysis, contrasting specific sections of the Sarbanes-Oxley Act with corresponding German regulations, such as the Handelsgesetzbuch (HGB) and the Aktiengesetz (AktG).
What is covered in the main body of the work?
The main body examines the applicability of the Act to foreign accounting firms, analyzes conflicts regarding internal control documentation, and critiques the lack of consideration for international conflicts of laws.
Which keywords best characterize this work?
The work is characterized by terms such as Sarbanes-Oxley Act, corporate governance, extraterritoriality, comparative law, compliance, and international regulatory challenges.
How does the Act specifically conflict with the German Principle of Discretion?
Section 105 of the Act requires documents to be provided for investigations, which conflicts with the German Principle of Discretion (§ 323 I 1 AktG) that mandates the confidentiality of the certified public accountant.
What does the author suggest to mitigate compliance risks?
The author suggests either utilizing the SEC's discretionary rule of exception for foreign firms or pursuing political solutions through coordination between the European Union and U.S. authorities.
- Quote paper
- Nick Oberheiden (Author), 2003, The Sarbanes Oxley Act of 2002, Munich, GRIN Verlag, https://www.grin.com/document/20211
