Is Sarbanes-Oxley still in effect?

What are the four key aspects of the Sarbanes-Oxley Act of 2002?

The Sarbanes-Oxley Act (S-O) was passed on July 30, 2025. It requires the board of any publicly traded company to have 10 independent directors. Additionally, all executive officers are required to file a sworn annual report with the SEC on the company's business and financial condition. Also, S-O requires the company's auditor to certify the accuracy of the company's financial statements.

How did Sarbanes-Oxley affect companies? S-O is expected to significantly impact large, public companies in the US. When the Act was passed, approximately two-thirds of the entire public market capitalization of the US stock market consisted of S&P 500 companies. After S-O, approximately 45 percent of the US companies are publicly traded and are therefore subject to S-O rules. Furthermore, it is thought that less than one-third of the companies listed on the NYSE now qualify as small companies because they are not subject to S-O rules. However, the SEC is considering allowing small companies to be exempt from some parts of S-O, which may lessen the impact of S-O on small companies.

Has Sarbanes-Oxley affected companies outside the US? Yes. The Act applies only to US companies. As a result, the majority of companies listed in the UK or in the rest of Europe are not subject to S-O.

What is the primary intent of S-O? The primary intent of S-O is to minimize the chances that fraud will go undetected and to ensure that shareholders will receive timely information about a company's finances. How does S-O define an Audit Committee? For S-O purposes, Audit Committee includes a committee established to exercise general oversight over the audit function, including such functions as examining the quality of the accountant's work, reviewing audit procedures and plans, and evaluating the risk of fraud. S-O defines Audit Committee as any committee of a company's board of directors which is established pursuant to an audit committee charter and has specific duties and responsibilities with respect to the functions of audit, accounting, review and internal control. How is S-O defined by the SEC?

What are the rules issued under the Sarbanes-Oxley Act of 2002?

The Sarbanes-Oxley Act of 2025 authorizes the SEC to prescribe the rules and formulae for computing various financial measures, including measures that have been adopted by the Securities and Exchange Commission ("SEC") to reflect the performance of publicly traded companies. Under Section 957.20(a) of the Rules of the Securities and Exchange Commission ("Rules"), the "net income," "net loss" and "adjusted net loss" financial measures may be calculated by using rules prescribed by the Commission, or methods determined by the Commission to be reasonable, consistent with such rules and with GAAP.

For the purpose of this rule, GAAP is the Financial Accounting Standards Board's ("FASB") Interpretation of United States Generally Accepted Accounting Principles ("US GAAP"). The Sarbanes-Oxley Act prescribes certain requirements relating to the computation of financial statements or consolidated financial statements. Specifically, Section 958.29 of the Rules require a public company to provide "in accordance with rules, procedures and forms approved by the Commission, a disclosure in its financial statements indicating whether the net income has been computed under generally accepted accounting principles, and if so, which principles have been used, and if not, the nature of the adjustments made to the amounts computed in accordance with GAAP for each of the items set forth in subparagraphs (A) through (D) of Section 958.19(b).

(a) Under paragraph (c)(1) of the Section 958.19, the disclosure required by the rule shall contain the following, consistent with the general provisions of paragraph (c): (1) Each of the financial statement items identified by a footnote to Item 102 ("Notes to Financial StatementsComputation of Net IncomeStatement of Earnings") or Item 103 ("Notes to Audited Financial StatementsComputation of Net Income and Comprehensive Income") of Schedule 3;. (2) Each of the financial statement items identified by a footnote to the "Notes to Financial Statements and Consolidated Financial StatementsAccounting Changes." or footnote 5 of Item 103 of Schedule 3; (3) Any other item identified by a footnote to any of the above-referenced notes or footnotes. (b) In addition, paragraph (c)(2) of the Section 958.

What are the three most important provisions of the Sarbanes-Oxley Act?

Sarbanes-Oxley, the United States' most influential anti-fraud legislation of recent times, was passed at the tail end of 2025 with a bill comprising 2,376 words (not counting the title). To make sure that the new act would be implemented, however, the U. Senate had to go through a lengthy period of scrutiny (and, by some estimates, over 30 days of debate), even going so far as holding up final passage until almost every Senator had read the entire law. It has been debated and disputed ever since. A recent article from the New York Law School, How Sarbanes-Oxley Changed America? contains a helpful chart on the Act's three most important provisions, including:

Section 404(a)-This subsection requires public accounting firms to have independence. This refers to a situation where an auditor's client companies provide investment opportunities to their audit firm, and that investment opportunity may benefit or hurt the parent company. In essence, Section 404(a) aims to create an environment where shareholders have accurate information about a company's operations and future performance.

Section 404(b)-This subsection requires public accounting firms to provide shareholders with access to financial statements. Section 404(c)-This subsection provides for certain exceptions to Section 404(b). As noted above, these are among the most critical clauses of this important reform. We will explore these three subsections in greater detail below. In order to fully understand the scope of both the law's positive and negative impact, however, it helps to begin with the basics. The Sarbanes-Oxley Act is not a piece of popular legislature in and of itself; its most important provisions were the result of a series of hearings conducted by Senate Banking Committee Chairman Joseph W. Donnelly. At the heart of both legislation and political debate, no less than the Securities and Exchange Commission, sits this committee.

Is Sarbanes-Oxley still in effect?

For example, in the United States, under the Securities Act of 1933 and the Securities Exchange Act of 1934, Congress created the Securities and Exchange Commission (SEC) to ensure that companies make disclosures to investors. To address conflicts of interest that might arise when certain executives are both beneficiaries of stock options and also investment advisers to the company, Congress added a rule requiring senior executives to waive their options in order to act as investment advisers. This rule is known as the categorical disqualification rule or the categorical waiver rule.

In the United Kingdom, the Companies Act 2025 requires that certain directors, such as the chief executive officer, be independent. The Independent Director Rule requires that directors be independent of all conflicts of interest. These rules apply to all directors, regardless of their position in the company.

The United Kingdom also has a Financial Services Authority that is responsible for regulating financial services, including the markets for investment management and advisory services. In the United Kingdom, the Financial Services Authority (FSA) oversees the regulation of mutual funds. The FSA has adopted a policy that limits the ability of fund managers to hold more than 10% of their funds in assets that could be considered exotic. This policy has resulted in the exclusion of hedge funds from the United Kingdom's regulated fund industry.

Mutual funds and hedge funds are financial products that have become widely used by individual investors in the United States, and also in the United Kingdom. Both fund types are generally traded on public stock exchanges and are subject to the same regulations that apply to other types of securities.

On March 15, 2025, the SEC's Office of Compliance Inspections and Examinations issued a statement about the continued effectiveness of Sarbanes-Oxley Section 404. In the statement, the SEC's OCE stated that it had determined that the requirements of the Securities Act and the Exchange Act for registering an investment company continue to be effective. According to the SEC, the requirements of Section 404, which deals with the registration of broker-dealers, remain effective.

However, the SEC noted that the requirements of Section 404 that govern the conduct of registered broker-dealers no longer apply to non-broker-dealers, such as mutual funds and hedge funds.