The Sarbanes-Oxley Act of 2002

Client Advisory

July 2002

The last year in corporate America has seen a seemingly endless series of financial disasters, from Enron to Global Crossings to WorldCom to Adelphia to Qwest, with the consequent destruction of scores of billions in shareholder investment and retirement income, the loss of many thousands of jobs, and the utter elimination of businesses once revered as sound and respected companies and advisors.

Since Enron, responsible boards of directors throughout the country have been undergoing intense self-examinations to avoid similar internal financial control failures. And now, with the approval of the President and all but 3 members of Congress, the Sarbanes-Oxley Act of 2002 has become law effective July 30, 2002.

Sarbanes-Oxley is an intensely thoroughgoing law intended to affect all public companies (and those in the active registration process), including foreign companies traded or listed in the U.S., and their directors, officers, auditors and counsel. Other possible targets of interest, including the investment bankers and the rating agencies, are designated for further study, as are the issues of the effectiveness of prior regulation and enforcement efforts.

Many of Sarbanes-Oxley’s provisions are effective immediately, and others phase in over the coming months or as regulations are formulated by the SEC. At the same time, the major exchanges and Nasdaq are instituting their own reforms, and the criminal and civil litigation underway involving the companies and their officers and advisors can also be expected to refine and intensify the applicable standards of conduct.

Public Company Accounting Oversight Board 

Sarbanes-Oxley first (§ 101) creates a new nonprofit self-regulatory corporation, the “Public Company Accounting Oversight Board,” whose five members (of whom only 2 may be present or former CPAs) will be appointed within 90 days and will start operations within 270 days, and will serve full-time for 5-year terms (renewable once), financed by new, public company fees based on market capitalization. The Oversight Board will register, inspect and discipline public accounting firms, including foreign firms in certain cases, and establish and enforce auditing, quality control, and independence standards, [1] all subject to broad SEC oversight. The new Oversight Board will fund FASB, the Financial Accounting Standards Board, in its continued authorship and interpretation of GAAP; the new Board will not itself establish accounting principles, but rather will administer and enforce standards relating to the audit process.

Auditors of public companies will be required to register with the new Oversight Board beginning 180 days after the Board starts operations (§ 102), and then file annual reports with review fees. As with foreign public companies trading here, foreign audit firms will be subject to regulation if they perform audit services for public companies in the U.S.

In establishing standards for public company auditors, the new Oversight Board may simply continue to enforce existing standards for audit conduct, quality, ethics and independence (§ 103).

Larger CPA firms will be subject to annual Oversight Board inspections (including reviews of selected audits and lawsuits), smaller ones at least every three years (§ 104), with the results, but not the documents submitted, made public.

The new Oversight Board is empowered to investigate auditors and their affiliates for rule and law violations, and discipline, fine, and disenfranchise violators (§ 105).

Auditors as Consultants

Sarbanes-Oxley enters the long-standing debate over auditors as consultants.[2]  After a phase-in period of 180 days after the Oversight Board starts operations, auditors cannot perform designated “non-audit services” to a public company client contemporaneously with their audit (§ 201), and may perform other non-designated services and tax advice only with advance approval of the audit committee and with appropriate disclosure in the company’s SEC reports. These proscriptions are broadly in line with current SEC auditor independence rules.

Auditor Rotations, Conflicts, and Independence

The audit firm itself, following registration with the Oversight Board, must now rotate its lead audit partner every five years (§ 203), and the possibility of firm-wide rotations will be studied by the Comptroller General over the next year (§ 207). Sarbanes-Oxley’s new conflict rules now prohibit an audit by a firm if the issuer’s chief executive officer, chief financial officer, chief accounting officer, or equivalent person was employed by the auditors and participated in the audit of the issuer in the past year (§ 206).

Audit Committees

The new legislation requires all covered companies to have audit committees comprised solely of independent, unaffiliated directors who do not accept any consulting, advisory, or other compensatory fee from the company (§ 301). That committee, with independent counsel and advisors of its choice, and with its own budget, will appoint, oversee, and compensate the auditors, and resolve financial reporting disagreements, and must establish complaint and whistle-blower procedures ensuring anonymity and confidentiality.[3] The new law contemplates that one committee member would be a financial expert (or the company must disclose why such an expert is absent), and if the company does not have an audit committee then the full Board shall be deemed the committee. Here the problem will be finding qualified individuals for the audit committee who do not also aspire to other relationships with the company beyond their committee and Board meetings. The universe of these persons is limited.

CEO and CFO Financial Certifications

Sarbanes-Oxley has two certification requirements, one, § 302, effective within 30 days (when SEC rules are to be adopted) and the other, § 906, effective immediately.

The certification requirements of Sarbanes-Oxley are much broader than the SEC’s June 27, 2002 certification order (No. 4-460) (the “Order”).[4]  The Order applied to almost 1,000 of the country’s largest companies. The SEC on August 2, 2002 (Release No. 34-46300) announced that in accordance with the new law, it proposed to issue final rules on or prior to August 29, 2002, to require the certification mandated by Section 302. Release No. 34-46300 alerted interested parties to the proposed Section 302 Rules, and to the differences between those rules and the rules in the Order.

The § 302 certification will apply to every annual and quarterly report, where the CEO and CFO must certify that they have read the report, that, to their knowledge, it does not contain any material misstatements or omissions, that the financial statements, and other financial information in the report, “fairly present” in all material respects the company’s results of operations and financial condition, that the certifying officers are responsible for establishing and maintaining the company’s internal controls, that the controls are appropriately designed, and that the controls’ effectiveness has been evaluated within the last 90 days. The certification must report the officers’ conclusions regarding the effectiveness of the internal controls, that they have reported to the auditors and the audit committee all significant deficiencies and material weaknesses in the controls, and any fraud, “whether or not material,” involving management or other employees who have a significant role in controls, and finally whether there were significant changes in the internal controls (or in other factors that could significantly affect them) subsequent to their evaluation date, including any corrective actions taken with regard to significant deficiencies and material weaknesses. 

In Release No. 34-46300, the SEC highlighted several substantive differences between the Section 302 certification and the certification proposed in the Order, which used a “plain English” approach (while Section 302 uses the formulation found in 1934 Act Rules 10b-5 and 12b-20, and requires an additional attestation regarding the financial disclosure included in the reports). Furthermore, while the SEC’s proposed certification contains an attestation regarding the completion of a review of internal procedures and controls aimed at assuring adequate disclosure, Sarbanes-Oxley requires additional information regarding certain aspects and results of that review.

The Order as originally proposed would only have applied to issuers subject to the reporting requirements of Section 13(a) or 15(d) of the 1934 Act that filed annual reports on Forms 10-K and 10-KSB and quarterly reports on Forms 10-Q and 10-QSB (i.e., U.S. companies and foreign-domiciled companies with a majority of U.S. security holders and U.S.-based business or management). Section 302 also applies to foreign private issuers.[5] The SEC therefore intends to adopt final rules that would apply the certification requirement to foreign private issuers filing annual reports on Form 20-F and to Canadian issuers filing Form 40-F under the SEC’s Multijurisdictional Disclosure System.

Section 302 requires the CEO and CFO to attest as to their company’s internal controls, but does not directly address the maintenance of those requirements. The SEC’s proposed rules would require maintenance of specific procedures to provide reasonable assurance that the company is able to collect, process and disclose, within the specified time periods, the information, including non-financial information, required to be disclosed in the periodic and current reports. The SEC does not propose to modify, and continues to seek comments on, the proposed Rules 13a-15(a) and 15d-15(a) that would impose this requirement.[6]

The § 906 certification requirement of Sarbanes-Oxley is a criminal provision, with fines of up to $1 million and imprisonment up to 10 years, with willful violations attracting a fine up to $5 million and imprisonment up to 20 years.  

Section 906 requires that each periodic report containing financial statements filed pursuant to the 1934 Act shall be accompanied by a certification that the report “fully complies” with the requirements of Section 13(a) or 15(d), and that the information “fairly presents, in all material respects, the financial condition and results of operations” of the company.  

Unlike Section 302, the Section 906 certification is absolute, with no “knowledge” or “materiality” qualifier, but the criminal penalties are reserved for those who certify “knowing” that the report in question does not comport with the requirements. This is an area where further definition obviously is required from the SEC and the DOJ, to clarify whether § 906 is in fact effective immediately (a position apparently concurred in by the SEC in Release No. 34-46300 n.11), whether one or two certifications are required, whether it covers 8-K Reports, how exactly the certification is to “accompany” the report (whether by exhibit or related letter), and if perhaps a § 302 knowledge qualifier (and a materiality qualifier) can simply be added to a § 906 certification, as some issuers have done in the filings to date.  

Obviously, most companies will now have to pay even closer attention to their financial statement due diligence procedures and internal controls, which is exactly the intent of these sections of Sarbanes-Oxley. A separate and so far unresolved issue is the extent of indemnification of directors and officers who violate these provisions, and the availability of D&O Insurance in these cases.

Prohibiting Improper Influence on the Conduct of Audits

Section 303 of Sarbanes-Oxley directs the SEC to adopt rules within 270 days to make it unlawful for any officer or director, or any person operating under their direction “to take any action to fraudulently influence, coerce, manipulate, or mislead” any auditor of the company “for the purpose of rendering [the company’s] financial statements materially misleading.”

Forfeiture of Incentive Compensation and Trading Profits 

Section 304 of Sarbanes-Oxley provides that the CEO and CFO of any company having to make a financial statement restatement because of their “misconduct” must reimburse the company for any bonuses or other incentive compensation, as well as any trading profits, during the 12-month period following the first public issuance or filing of the financial results.

Blackout Periods

The new law (§ 306), effective as of 180 days after enactment, extends any blackout period applicable to the company’s pension funds to directors and officers, with respect to any shares received in connection with their employment or service. In the Enron case, the employee benefit plans were in blackout when the rumors began surfacing, and officers sold when the plans could not. Section 306 defines “blackout period” to mean a period of more than three consecutive business days during which the ability of 50% or more of the participants in the company’s 401(k) and other ERISA individual account plans to trade company stock is suspended (other than pursuant to express investment restrictions timely disclosed).  The SEC is to consult with the Department of Labor and adopt rules that clarify Section 306 and prevent evasion. Trading profits realized by a director or officer in violation of Section 306 are recoverable by the company in a direct or derivative action, but the determination of the amount of the recoverable profit presents issues awaiting further definition.

Standards of Professional Conduct for SEC Counsel

Sarbanes-Oxley requires the SEC, within 180 days, to promulgate rules of professional responsibility for securities lawyers (§ 307). The rules must require lawyers to report evidence of any material violation of securities law or breach of fiduciary duty to the issuer’s chief legal counsel or chief executive officer. If the counsel or CEO does not “appropriately” respond, then the attorney must report the evidence to the audit committee or the board of directors. The Bar has opposed these provisions, objecting that they do not filter the baseless rumor from the substantive claim, and if the test for the new law is how it would have tempered or avoided the long line of scandals, there is no evidence that it would have or could have, since the lawyers, to the extent involved, seem to have reviewed and in good faith approved the relevant issues. The countervailing view emphasizes that there are cases where the lawyer certainly must go to the Board or even beyond, and that the breadth and ambiguity of these new provisions imperils the attorney-client privilege and would inhibit the candid discussion of problems which possibly could result in the cure of a potential issue before it fomented into a violation or worse.

FAIR Funds for Investors

The new legislation establishes “FAIR Funds for Investors,” which specifies that civil penalties for securities law violations may be added to the disgorgement fund for the benefit of the victims of the violation.  The SEC also is directed to improve collection rates, likely as the result of recent criticisms by the GAO.

Disclosure of Off-Balance Sheet Transactions and Pro Forma Reconciliations

In a provision directed squarely at Enron and Global Crossings, Sarbanes-Oxley (§ 401) directs the SEC within 180 days to require public company disclosure of all material off-balance sheet transactions and obligations, and, in a provision which will affect the dotcom world especially, to require that “pro forma” financial information in any press release or other public disclosure must not include any material misstatement or omission and must be reconciled with generally accepted accounting principles.

Financial statements included in SEC-filed reports must now reflect all material correcting adjustments identified by the auditors as being in accordance with GAAP and with SEC requirements. The issues of off-balance sheet transactions generally and the use of “SPEs,” -- special purpose entities – are also directed for further study and SEC recommendation.

Loans to Insiders

Sarbanes-Oxley (§ 402), effective immediately, prohibits public companies (other than investment companies) from extending new credit to any director or executive officer, other than certain specified margin or other loans made in the ordinary course of business (such as consumer loan companies), or from renewing or extending existing loans. Loans by U. S. banks and thrifts are not subject to the prohibition if the lender is FDIC-insured and the loans are subject to the insider lending restrictions of the Federal Reserve Act.

Accelerated Insider Reporting

Sarbanes-Oxley (§ 403), effective 30 days after enactment, accelerates, to the second business day following the trade, insider trade reporting by directors, officers, and 10% stockholders; eventually (within one year) the reports must be filed electronically and posted on the issuer’s and the SEC’s web sites. Since many companies assist their insiders with Form 4 filings, which are usually paper filings, effectively these companies have one day to collect the information, complete the Form, and send it overnight for filing.

The new requirements amend Section 16(a) of the 1934 Act, which currently requires Form 4s (Purchases and Sales) 10 days after the close of the relevant month, and Form 5s (gifts and option grants) 45 days after fiscal year-end. It is likely that the SEC will coordinate the new requirements with its own pending proposals to require two-day-accelerated 8-K filings reporting an insider trade. Further SEC definition will be required to coordinate the new accelerated filing requirements with existing filing dates and exemptions (such as routine 401(k) acquisitions).

Disclosure of Management’s Assessment of Internal Controls

Section 404 of Sarbanes-Oxley requires the SEC to adopt rules requiring a reporting company to include in its annual report an “internal control report,” which would (i) state management’s responsibility for establishing and maintaining adequate internal control structures, and (ii) assess the effectiveness of the company’s internal control structure and its financial reporting procedures. The auditor must attest to, and report on, management’s assessment.

Expanded SEC Review of Disclosure Documents

Section 408 of Sarbanes-Oxley requires that the SEC review "on a regular and systematic basis" the disclosures made by reporting companies. Factors such as market capitalization, volatility, and material financial restatements are to be taken into account by the SEC in determining the frequency of review, which is to occur at least once every three years.

Accelerated Company Disclosures

Sarbanes-Oxley (§ 409) authorizes the SEC to require reporting public companies to disclose on a “rapid and current basis” information concerning changes in the issuer’s financial condition or operations. In this case, there simply must be further definition from the SEC, which has recently proposed expanding the Form 8-K reportable items, and accelerating the filing of 8-Ks to two days after occurrence of the relevant event.

Code of Ethics for Senior Financial Officers

Sarbanes-Oxley (§ 406) indirectly requires, within 180 days when the SEC adopts an effecting rule, a Senior Financial Officer Code of Ethics by requiring public companies to disclose whether or not they have established one for their senior financial officers (the CFO, and the comptroller or chief accounting officer), and if not, why not. Disclosure will also be required of any waivers of, or changes in, the code, which would have standards reasonably necessary to promote (i) honest and ethical conduct, (ii) "full, fair, timely and understandable" disclosure, and (iii) compliance with applicable governmental rules and regulations.

Analysts’ Conflicts of Interest

Sarbanes-Oxley (§ 501) amends the 1934 Act to require the SEC or the market self-regulatory organizations within one year after enactment to adopt rules designed to address securities analysts’ conflicts of interest. The SEC’s new Regulation AC also governs research analysts’ research reports and public appearances, and the recent Attorney General proceedings in New York also highlight the change in and leveling of the playing field in this area of such importance to investors.

Statutes of Limitation

Sarbanes-Oxley provides a limitations period for private securities fraud claims of the earlier of two years after the discovery of the facts constituting the violation or five years after the violation. The statutes do not presently provide an explicit limitations period, but the courts generally apply a period of one year after discovery or three years after the violation.

Job Protection for Employee Whistleblowers

Section 806 of Sarbanes-Oxley protects against employment termination or other retaliatory action for any employee, contractor, subcontractor or agent of a public company who (i) provides evidence regarding conduct that the employee reasonably believes violates federal securities or antifraud laws, or (ii) testifies or participates in, or files, a securities or antifraud proceeding. Relief can include reinstatement, back pay or special damages.

Offenses and Sanctions

Sarbanes-Oxley creates new offenses, increases existing penalties, adjusts the Federal sentencing Guidelines as appropriate, and gives the SEC further enforcement authority.

A new crime of “Securities Fraud,” likely redundant of present securities laws provisions (but probably attractive to prosecutors because of the enhanced penalties), prohibits fraud in connection with securities registered under Section 12 of the 1934 Act (§ 807).

A new obstruction of justice offense, again likely redundant of current law, is created for knowingly destroying or altering documents with the intent of impeding a federal investigation (§ 802). With a view toward Enron, the new crime prohibits document destruction “in contemplation of” any Federal investigation, versus existing law which requires an existing investigation.

 Another new obstruction of justice offense is created for destroying corporate audit or review records before five years have elapsed from the end of the period in which the audit or review was completed (§ 802). Auditors must also retain work papers and other records to be specified by the SEC for five years. This broadly conforms to minimum current record retention policies in any event.

Section 902 of Sarbanes-Oxley provides broadly that any attempt or conspiracy to commit a criminal fraud offense will be subject to the same penalties as if the attempt or conspiracy had succeeded.

As discussed above, Section 906 of Sarbanes-Oxley subjects the CEO and CFO of public companies to potential criminal penalties if they fail properly to certify their company’s periodic SEC reports.

Sarbanes-Oxley makes it illegal to alter, destroy or conceal a document or other object, or attempt to do so, in order to impair the object for use in an official proceeding, or to otherwise obstruct or impede an official proceeding (§ 1102). 

Section 1107 of Sarbanes-Oxley prohibits interference with the lawful employment or livelihood of any informant in a federal criminal proceeding.

Sarbanes-Oxley also increases the terms and fines for various violations, and by also adjusting the Sentencing Guidelines, the more severe penalties may have pronounced effect. The new penalties provide that:

  • maximum imprisonment time for mail and wire fraud is increased from five years to 20 years (§ 903).

  • maximum penalties for violations of the 1934 Act are increased from 10 years to 20 years, individual fines from $1 million to $5 million, and fines for entities from $2.5 million to $25 million (§1106).

  • criminal sanctions for violations of the reporting and disclosure provisions of ERISA are upgraded from misdemeanors to felonies, and penalties are increased from one year to 10 years; individual fines from $5,000 to $100,000, and fines for entities from $100,000 to $500,000 (§ 904).

Sarbanes-Oxley’s revised penalties would have little practical effect without a corresponding adjustment of the Federal Sentencing Guidelines, so the new law requires the U. S. Sentencing Commission to amend the federal sentencing guidelines within 180 days to ensure that the penalties are consistent with the Act and are sufficient to deter and punish (see § 805 – obstruction and destruction of documents, fraud and misconduct; § 905 – securities fraud and ERISA; and § 1104 – securities and accounting fraud).

Sarbanes-Oxley also empowers the SEC to seek injunctive relief (§ 305), to seek to freeze public company assets to block extraordinary payments (§ 1103) and to proceed by expedited cease-and-desist proceedings to prohibit any person who has violated the antifraud provisions of Section 10(b) of the 1934 Act from serving as an officer or director of a public company (§ 1105). 

Section 803 of Sarbanes-Oxley precludes a debtor from obtaining a discharge in bankruptcy proceedings of debts incurred in violation of any federal or state securities law.

Effective Dates

As noted above, Sarbanes-Oxley has various provisions which are effective immediately, including the § 906 certification. Others are the forfeiture of CEO and CFO bonuses trading profits after a financial restatement due to misconduct (§ 304); the loan prohibitions (§ 402); the SEC’s more intense review of companies’ filings at least every three years (§ 408); the “rapid and current” disclosure requirements (§ 409); the bankruptcy non-discharge provisions (§ 803); the new statutes of limitation for new civil securities fraud actions (§ 804); the new crimes of destroying, altering or falsifying records in Federal investigations and bankruptcy and destroying corporate audit records, and the directives to amend the Federal Sentencing Guidelines (§§ 801-807, 901-906 and 1101-1107).

Others of Sarbanes-Oxley’s requirements come into effect within 30 days, including the CEO and CFO certifications under § 302, and the new, two-day insider trading reports (§ 403). 

In several areas, Sarbanes-Oxley directs the SEC to issue proposed rules within 90 days and final rules within 180 days, including those regulating the imposition of improper influence on the conduct of an audit for the purpose of rendering the company’s financial statements materially misleading (§ 303); the disclosure of ethics codes, waivers and violations  for senior financial officers (§ 406); and the disclosures whether a financial expert sits on the audit committee  (§ 407).

Certain of Sarbanes-Oxley’s provisions are known to be more complicated to implement, or to attract more requests for specific issue treatment. Here the effective date is 180 days, or the SEC is given that period to promulgate rules: the blackout period trading bar (§ 306); the provisions requiring public company attorneys to report evidence of violations of securities laws or breaches of fiduciary duties to the general counsel and the CEO (§ 307); the rules for GAAP reconciliation of pro forma financial information and disclosure of material off-balance sheet transactions (§ 401); and the directives to amend the Federal Sentencing Guidelines to ensure that the penalties for certain offenses are consistent with the new law and are sufficient to deter and punish (§§ 805, 905, 1104).

The SEC is given 270 days to issue the new audit committee rules, (§ 301), and to determine whether the Oversight Board is operating and has the capacity to carry out the requirements of the Act (§§ 101 and 107).

Finally, certain of Sarbanes-Oxley’s requirements will phase in after one year, including the SEC’s study of SPEs (§ 401); the electronic filing of insider trade reports (§ 403); the SEC (or exchange, or Nasdaq) analyst conflict of interest rules (§ 501); and the Comptroller General’s study of the possibility of rotating firms as well as audit partners (207).

And in fact one of the key provisions of the new law, the registration of public company audit firms with the Oversight Board, could extend beyond one year if the full permitted period for the Board’s organization (270 days) is followed by the full period (180 days) for the SEC’s review of the Board and decision whether  it has the capacity to carry out the requirements of the Act (§§ 201, 202).

Mandated Studies

The new law sets the stage for the next round of securities and corporate legislation by authorizing studies into the consolidation of accounting firms, the role and operations of credit rating agencies, financial statement-related enforcement action experience, and the role of investment banks and financial advisors in the manipulation of earnings and the misstatement of financials by public companies.

Additional SEC Authority

Sarbanes-Oxley also gives the SEC additional authority in several areas considered necessary to accomplish the purposes of the new law. These include the SEC’s being authorized to recognize accounting principles as being within GAAP where they are established by a “standard setting body,” and to determine whether a particular entity qualifies as a standard setting body (§ 108), the power to censure and to bar persons from SEC practice if they are unqualified or have engaged in unethical conduct or have willfully violated the securities laws (§ 602), and the power to consider orders of state securities commissions when contemplating disciplinary action against brokers or dealers (§ 604).


Sarbanes-Oxley significantly increases the SEC’s budget to accommodate the significantly increased burden on the Agency from the new regulatory, oversight and prosecutorial requirements of the law (§ 601).

International Application

Broadly, Sarbanes-Oxley will apply to any foreign public company which has shares listed in the U.S. or is otherwise required to file periodic reports with the SEC. This means that all of the new corporate governance requirements will apply, which is a dramatic difference from the former U.S. regime toward foreign companies trading here, which was a disclosure-only approach without substantive regulation of the internal operations of the companies.

If the foreign company has an off-market ADR facility here and only furnishes information to the SEC under Rule 12g3-2(b), then the new law does not apply. But it does apply if the ADRs are traded on Nasdaq or are listed on an Exchange.

Offshore accounting firms which audit U.S. companies will also be subject to the new law’s auditor independence and oversight provisions. From the offshore client’s perspective, the CEO/CFO financial certification requirements should be addressed immediately, and any client about to file a Form 6-K should seek immediate advice.


Sarbanes-Oxley is an extraordinary extension of Federal law into areas where traditionally the emphasis had been on disclosure versus intra-corporate regulation. As the law comes into real effect, and regulations and interpretations are implemented, the new law can be expected to have thorough and hopefully beneficial effects on the operations and conduct of the companies subject to it.

Questions regarding Sarbanes-Oxley may be directed to Raphael S. Grunfeld ( or Robert A. McTamaney ( of our New York Office (212-732-3200).


[1] Including work paper retention for 7 years, second partner review, and internal control and audit testing requirements.

[2] “Non-audit services” are broadly (and ambiguously) defined as any professional services other than in connection with an audit or review of financial statements, and specifically include tax services, bookkeeping, systems design and implementation, appraisals, actuarial services, management or human resources services, investment banking, or legal or expert services unrelated to the audit. The Oversight Board may define further prescribed non-audit services.

[3] As discussed below, whistleblowers would also be protected against discharge or discipline under the new law.

[4] File No. 4-460: Order Requiring the Filing of Sworn Statements Pursuant to Section 21(a)(1) of the Securities Exchange Act of 1934 (June 27, 2002), available at (last modified 7/1/2002).  Also available at the SEC website are the form of the certification required (Exhibit A to the Order), a press release describing the Order, and a page of answers to Frequently Asked Questions.

[5] A “foreign private issuer” is any foreign issuer (other than a foreign government) except an issuer more than 50% of the voting securities of which are held of record by U.S. residents, and the majority of the executive officers or directors of which are U.S. citizens or residents (or more that 50% of the assets of which are in the U.S., or the business of which is administered principally in the U.S.).

[6] The SEC is also considering the manner of application of Section 302 to registered investment companies.

Carter Ledyard & Milburn LLP uses Client Advisories to inform clients and other interested parties of noteworthy issues, decisions and legislation which may affect them or their businesses. A Client Advisory does not constitute legal advice or an opinion. This document was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. © 2020 Carter Ledyard & Milburn LLP.
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