United States: SEC Proposes Rules to Implement Provisions of the Sarbanes-Oxley Act of 2002 Relating to Improper Influence on Conduct of Audits, Management´s Internal Control Reports, Codes of Ethics and Audits, Management´s Internal Control Reports, Codes of Ethic

The SEC recently proposed rules to implement Sections 303, 404, 406 and 407 of the Sarbanes-Oxley Act of 2002. Section 303 of the S-O Act prohibits improper influence on the conduct of audits; Section 404 requires disclosure of management's assessment of internal controls; Section 406 requires disclosure relating to whether an issuer has a code of ethics for senior financial officers; and Section 407 requires disclosure about whether an audit committee has designated a "financial expert." The SEC’s proposals raise a number of significant issues that are highlighted in the attached memo. The proposed rules would require companies to make a number of new public disclosures and impose a number of new responsibilities on companies and their boards and management. In many respects, the proposals would impose responsibilities that are greater than required under the S-O Act. As always, the SEC will be guided in adopting final rules by comments it receives in response to these proposals. Because of the importance of these proposals and their potential for imposing significant burdens on public companies, we strongly encourage companies to submit comments to the SEC on any or all of the proposals.

For complete memorandum as a PDF file, please click here.