News & Events 8/1/2002 Corporate Responsibility Act of 2002 On July 30th, President Bush signed into law H.R.3763 (the Sarbanes-Oxley Act).  Most of the provisions apply to U.S. public companies and non-U.S. public companies listed in the United States.  A summary of the Act's provisions appears below. Summary of Acts Provisions: * Executive compensation and related corporate governance reform. Requires CEOs and CFOs to disgorge incentive-based compensation and trading profits following accounting restatements (and freeze extraordinary payments to directors, officers, or controlling persons during an investigation), prohibits public companies from extending most types of credit to any director or executive officer and empowers the SEC to prohibit individuals from serving as directors or officers of public companies. These provisions became effective immediately upon enactment. * CEO/CFO certification. Directs the SEC to issue rules within 30 days requiring CEOs and CFOs of public companies to certify that their companies' annual and quarterly reports containing financial statements are appropriate and fair. * Audit committees. Directs the SEC within 270 days to require all public companies to have an audit committee comprised solely of independent directors and impose new duties on audit committees. * Corporate codes of ethics. Directs the SEC within 180 days to require public companies to disclose whether they have adopted a corporate code of ethics for senior financial officers, and to disclose immediately to the public any change in or waiver of their codes. * Accelerated reporting of insider transactions. Effective in 30 days, requires Form 4 reporting within two business days of transactions by "insiders" of U.S. public companies. * Benefit plan blackouts. Effective in 180 days, prohibits a public company's directors and executive officers from trading in its equity securities during any blackout period when the company's employees are prohibited from trading company stock they hold in company benefit plans. * Attorney professional responsibility. Directs the SEC within 180 days to establish professional conduct standards for attorneys representing public companies, including requiring attorneys to report evidence of material violations of securities law or breaches of fiduciary duty to the CEO or general counsel and, if the CEO or general counsel does not appropriately respond, to the audit committee or board of directors. * Whistleblower protection. Provides job protection to employees of public companies who provide information to investigators, Congress, or their supervisors regarding violations of securities or antifraud laws. This provision became effective immediately upon enactment. * Disclosure of off-balance-sheet transactions. Directs the SEC to issue rules within 180 days requiring disclosure of all material off-balance-sheet transactions and conduct a study within one year of special purpose entities. * Increased frequency of SEC review. Requires the SEC to review all public companies' filings at least every three years. * Real-time disclosure. Requires "rapid and current" public disclosure of material changes to public companies' financial condition or operations as may be required by future SEC rules. * Auditor independence and rotation. Prohibits auditors of public companies from providing specified non-audit services to the companies they audit (similar to the services currently prohibited by SEC rules), requires rotation of audit partners, and requires the Comptroller General to conduct a study of mandatory rotation of audit firms. This provision becomes effective after the new auditor oversight board commences operations. * Auditor oversight board. Creates a self-regulatory organization to establish auditing standards and regulate accounting firms that audit public companies. The new board must be in a position to be certified by the SEC within 270 days, and audit firms must be registered with it within 180 days after that certification. * FASB funding. Requires public companies to pay fees to fund the Financial Accounting Standards Board. * Principles-based accounting. Directs the SEC to study the adoption of a principles-based accounting system. * Analyst conflicts of interest. Requires the adoption within one year of rules to prevent conflicts of interest on the part of securities analysts, similar to the rules adopted by the National Association of Securities Dealers Inc. and New York Stock Exchange and approved by the SEC this spring. * No bankruptcy discharge of securities law liability. Disallows discharge in bankruptcy of liabilities arising under federal or state securities law violations, effective immediately upon enactment. * Securities litigation reform. Extends the statute of limitations in private securities fraud actions, effective immediately for actions commenced after enactment. * Document retention. Provides criminal penalties for destroying audit records and for destroying or falsifying any documents in order to impede a federal investigation. * Enhanced criminal penalties for securities fraud. Defines new criminal offenses involving conspiracy and attempt to violate federal antifraud rules, increases criminal penalties for willful violation of the federal securities laws and directs the United States Sentencing Commission to review sentencing guidelines for certain "white collar" and other crimes.