Law/421 Week 5 Article Review

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Category: Business and Industry

Date Submitted: 01/28/2014 10:58 AM

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Article Review

The article that I researched talks about how the Sarbanes Oxley Act of 2002 also applies to private companies. Many have perceived that the SOX act was to regulate only publically held companies. This is not true; in fact, there are some provisions of the act that pertain only to private companies. There are several examples of mandatory provisions that affect private companies. If these provisions were to be violated there would be severe penalties. A good example is that liabilities for violating federal and state security laws would not be dischargeable when a company goes bankrupt. This would include liabilities involving fraud in connection with the private placement of securities. Another good example is attempting to destroy or falsify records with intention of impending or influencing a federal agency. The penalty for this could be up to 20 years in prison. One more example would be retaliation against somebody who provides truthful information that relates to a federal offense to the police department or any other form of law enforcement. Doing so could lead to 10 years in prison (Mechur, 2011).

This article shows the importance of a company’s code of ethics. If a company were to have one put in place, it could reduce any sentence that a company could possibly receive if some sort of financial mishap were to occur. Many private companies also adopt their own code of ethics in order to work together with their financial officers. When a company is private; then, they are able to choose which provisions they would like to use. Public companies unfortunately do not have that option. This is one of the reasons why many public companies are becoming private.

The main reason why the Sarbanes Oxley Act was put into place was to protect investors from large public corporations, but we now know that is can and should be adopted for private companies as well. This is because the SOX act holds responsibility to a company’s CEO’s...