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MF Global Scandal Could Justify SOX

Regulators may be able to prove SOX's worth with the MF Global crisis.

Many critics of the Sarbanes-Oxley Act - which was brought about after fallout from a number of accounting scandals

Many critics of the Sarbanes-Oxley Act - which was brought about after fallout from a number of accounting scandals around the turn of the century - have argued that the law has failed to bring greater transparency to financial reporting or prevent companies from cooking the books.

However, as Reynolds Holding argues on Breakingviews, the recent financial crisis unfolding at MF Global "could finally help the Sarbanes-Oxley Act prove itself." Until now, complying with SOX has meant major costs for companies and has even forced some to move out of the U.S. in order to escape its onerous requirements, he says, but now the law is starting to encourage greater visibility into corporations' financial practices. 

"Critics have pummeled law enforcement for timidity toward financial crime and SarbOx for being all bark and no bite," Holding concludes. "Using the law to go after Jon Corzine’s former firm could show both have teeth after all."

The Securities and Exchange Commission is starting to use SOX to reclaim compensation that was doled out when CSK Auto Corporation was embroiled in an situation involving accounting fraud, The New York Times reports. The agency is starting to use the act more often in their proceedings, which it hopes will serve as a deterrent to CEOs and other executives who want to preserve their salaries and bonuses.  

Comments

Michael Corcoran CPA
Title: Managing Partner
Company: GVP Partners
(Managing Partner, GVP Partners) |

SOX was needed and has nothing to do with the failure at MF Global.

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