SarBox compliance
"private firms that may be the target of an acquisition or merger by a public firm will also fall under SarbOx scrutiny ensuring compliance of the final entity." Looks like CSHD is included.
"Officers and Directors:
CEOs and CFOs of public companies are required to personally certify the accuracy of various financial reports, with significant criminal penalties for false certifications (up to 10 years in prison for "knowing" violations; up to 20 years if "willful"). While the penalties sound significant, the government's difficulty in enforcing this provision will likely come in proving that a corporate officer's inaccurate certification was done at least "knowingly," as opposed to negligently or even recklessly.
In addition, if a public company makes a "required" accounting restatement due to "misconduct," that company's CEO and CFO can be forced to forfeit any bonuses or profits gained from selling company stock for a one-year period. But the lack of definitions for the terms "required" and "misconduct," other potential loopholes, and the SEC's power to grant exemptions could combine to dilute the strength of this provision.
The new law makes it somewhat easier for the government to prohibit officers and directors who have committed securities law violations from ever again serving in those positions. However, that potential sanction was at least theoretically available even before passage of Sarbanes-Oxley.
Disclosure Requirements:
A number of provisions add to or strengthen disclosure requirements placed on public companies. All material off-balance sheet transactions or special purpose entities must be disclosed in annual and quarterly financial reports. If a company uses pro forma numbers in its financial reports or press releases, it must also show what the financial results would be using generally accepted accounting principles.
Legal insider trading by company officers or directors must be reported much sooner, within two business days. Other material changes to a company's financial condition must be reported on a "rapid and current basis." Even the presence or absence of a company ethics code for its senior financial officers, or any waiver of that code, must be disclosed.
Criminal Penalties:
In theory, the crime and punishment section appears to be one of the law's tougher provisions. It creates new or broader federal crimes for obstruction of justice and securities fraud, with maximum prison time of 20 or 25 years, respectively. Sentences for many existing federal crimes were enhanced. Mail and wire fraud maximum penalties were quadrupled, from 5 to 20 years. The maximum sentence for some securities law violations was doubled from 10 to 20 years, and the maximum fine against a company for the same offense was increased from $2.5 million to $25 million.
Furthermore, the U.S. Sentencing Commission, which sets guidelines that federal judges must use in deciding a particular defendant's actual sentence, is instructed to consider revising its guidelines to ensure longer sentences for securities, pension, and accounting fraud, especially for officers and directors of public companies. The Sentencing Commission has already adopted a temporary plan to respond to Congress' directive, with many actual sentences likely to increase by at least 25 percent. However, the Justice Department has objected to the temporary guidelines, saying they do not adequately enhance the sentences in smaller-scale fraud cases. [9]
In practice, the strength of the criminal penalties portion of Sarbanes-Oxley will depend on the government's success in prosecuting specific individuals. The statute's harsher penalties, of course, cannot be used for any crimes that occurred before the new law was passed. If corporate officers considered to be the prime culprits in the scandals of the past year ultimately serve little or no prison time, the deterrence effect of the tough penalties may prove to be minimal."
