TheCorporateCounsel.net

When participating in the SEC Historical Society’s SOX anniversary program a few weeks ago, I was struck by one topic in particular – the changes to the SEC review process that SOX brought about. Section 408 of the Sarbanes-Oxley Act required that the SEC review every public company no less frequently than once of every three years, and that directive resulted in a significant expansion of Corp Fin and reinvention of the work of the Division in a way that lives with us to this day.

The events that led up to the enactment of the Sarbanes-Oxley Act principally involved accounting fraud, so Corp Fin inevitably became a very accounting-focused Division, with the review of public company filings becoming particularly focused on the financial statements and related disclosure. It was very interesting to hear Shelley Parratt and Alan Beller recount the Herculean efforts that were necessary to actually hire the right people to build out a reconstituted Corp Fin and to quickly stand up a review program that could meet the SOX directive.

Looking back, the ramped up SEC reviews of periodic reports really changed the relationship between public companies and the SEC, as the prospect for a comment letter significantly increased. At the same time, the enhanced review program and the enhanced disclosures in SOX’s wake meant that the SEC could adopt the Securities Offering Reform changes just a few years later, which I think everyone can agree has made things much easier when larger companies want to raise capital. It is all an important legacy that is useful to remember today now that SOX has turned 20 years old.

– Dave Lynn