The Fraud Protection Act
The most significant fraud prevention act in modern U.S. history, the Sarbanes--Oxley Act, put new anti-fraud standards in place for the boards of all public companies, management concerns and accounting firms in the United States in July 2002. It's commonly referred to as Sarbanes--Oxley, SarBox or SOX.
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Namesakes
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The act takes is name from its congressional sponsors, U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH).
History
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The federal government enacted the bill in response to a rash of high-profile accounting fraud scandals in major corporations (among them Enron and WorldCom) that deeply shook investor confidence in the U.S. markets.
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Features
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The act's 11 sections require public companies' boards to take on additional oversight responsibilities, require far greater disclosure, limit individual control and assign criminal penalties for fraudulent activities.
Benefits
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Transparency is a major fraud deterrent and increasing corporate transparency was the basis of Sarbanes-Oxley Act. A 2010 research paper published by the University of Amsterdam found that SOX materially enhanced accounting transparency when compared to a sample of comparable overseas firms not subject to the statutes of the act.
Other Fraud Protection Acts
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There are scores of specific-case fraud protection and prevention acts in U.S. federal and state law. Some of the more recent of these (on the federal level) are the Tax Fraud Prevention Act of 2007 and the Foreclosure Rescue Fraud Prevention Act of 2008. Specific-case fraud prevention acts at the state level number in the hundreds.
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