Sarbanes Oxley Act, 2002 (SOX) - named for its originators – Republican Senator Paul Sarbanes And Democratic Senator Michael Oxley, is a drastic measure to improve corporate governance and regain investor trust and confidence.
SOX addresses the shortcomings noticed in corporate governance practices prevailing in USA, redefines the roles and responsibilities of various participants in the corporate governance chain and prescribes severe penalties for any wrongdoing – intentional or otherwise. SOX contains significant protections for corporate whistleblowers. Given its diverse civil, criminal and administrative provisions, the statute may be considered, over time, one of the most important whistleblower protection laws.
This law contains four other provisions directly relevant to whistleblower protection.
- First, the law requires that all publicly traded corporations create internal and independent “audit committees.”
- Second, the SOX sets forth new ethical standards for attorneys who practice before
the Securities and Exchange Commission (SEC).
- Third, the SOX amended the federal obstruction of justice statute and criminalized retaliation against whistleblowers who provide “truthful information” to a “law enforcement officer” about the “commission or possible commission of any Federal offense.” This provision of the SOX was not limited in its application to publicly traded corporations; it covers every employer nationwide.
- Forth, Section 3(b) of the SOX contains an enforcement provision concerning every clause of the SOX. This section states that “a violation by any person of this Act [i.e. the SOX] . . . shall be treated for all purposes in the same manner as a violation of the Securities Exchange Act of 1934.” This section grants jurisdiction to the SEC to enforce every aspect of the SOX.