* Jonathan Shirley is an Executive Editor of the Boston College International & Comparative Law Review.
1 Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat. 745 (2002).
2 Lawrence A. Cunningham, From Convergence to Comity in Corporate Law: Lessons from the Inauspicious Case of SOX, 1 Int’l J. Disclosure & Governance (forthcoming 2004), http://ssrn.com/abstract=462142 (manuscript at 3).
3 Harold S. Bloomenthal, Sarbanes-Oxley Act in Perspective § 9 (2002).
4 See James Hamilton & Ted Trautmann, Sarbanes-Oxley Act of 2002: Law and Explanation 13 (2002).
5 Cunningham, supra note 2, at 1.
6 See id. at 9–10.
7 See Bloomenthal, supra note 3, § 1.
8 See id.
9 Id.
10 Id.
11 Id.
12 Bloomenthal, supra note 3, § 1.
13 Id.
14 Dennis K. Berman et al., Global Crossing Ltd. Files for Bankruptcy, Wall St. J., Jan. 29, 2002, at A3 [hereinafter Global Crossing Article].
15 Id.
16 See Andy Kessler, Winnick’s Voyage to the Bottom of the Sea, Wall St. J., Mar. 21, 2002, at A22.
17 Dennis K. Berman, Andersen’s ‘Swaps’ Method Draws Scrutiny, Wall St. J., Mar. 19, 2002, at A3 [hereinafter Andersen’s ‘Swaps’ Article].
18 Global Crossing Article, supra note 14.
19 Id.
20 Kessler, supra note 16. Goodwill represents “[a] business’s reputation, patronage, and other intangible assets that are considered when appraising the business, esp. for purchase.” Black’s Law Dictionary 557 (7th ed. abr. 2000).
21 See Andersen’s ‘Swaps’ Article, supra note 17.
22 Id.
23 Id.
24 Id.
25 Id.
26 Andersen’s ‘Swaps’ Article, supra note 17.
27 Id.
28 See Robert Frank & Deborah Solomon, Adelphia and Rigas Family Had a Vast Network of Business Ties, Wall St. J., May 24, 2002, at A1 [hereinafter Vast Network Article].
29 Id.
30 Deborah Solomon & Robert Frank, Adelphia is Weighing Plans to Sell Assets After Disclosing Off-Balance Sheet Debt, Wall St. J., Apr. 1, 2002, at A3.
31 See Vast Network Article, supra note 28.
32 Id.
33 Id.
34 Id.
35 Bloomenthal, supra note 3, § 6.
36 Id.
37 Id.
38 Id.
39 See id.
40 Bloomenthal, supra note 3, § 6.
41 See id. § 2.
42 Id. § 9.
43 Accounting Issues and Enron Collapse: Hearing On “Accounting and Investor Protection Issues Raised by Enron and Other Public Companies,” 107th Cong. (2002) (statement of Harvey L. Pitt, Chairman, Securities and Exchange Commission).
44 Bloomenthal, supra note 3, § 9.
45 Id.
46 Id.
47 Id.
48 See Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat. 745 (2002).
49 See Hamilton & Trautmann, supra note 4, at 13–14. This Note does not attempt to discuss all aspects of the Act but merely mentions its most significant elements.
50 Id. at 14.
51 Id.
52 Id. at 27–28 (citing testimony of former SEC Chief Accountant Michael Sutton before the Senate Committee).
53 See Sarbanes-Oxley Act §§ 101–109.
54 See id. § 101.
55 Id. § 109.
56 Hamilton & Trautmann, supra note 4, at 14.
57 Sarbanes-Oxley Act § 101.
58 Id. § 106.
59 “Issuer” is defined by the Act as a company that has registered securities on U.S. exchange. Id. § 2.
60 Id. § 106.
61 Id. § 104.
62 See Lawrence A. Cunningham, Introductory Accounting & Finance for Lawyers 259 (3d ed. 2002).
63 Hamilton & Trautmann, supra note 4, at 48.
64 See id.
65 Id.
66 See Leah Nathans Spiro, Ethics and Anderson Didn’t Add Up, Wall St. J., Mar. 20, 2003, at D8.
67 See id.
68 See id.
69 Id.
70 See Hamilton & Trautmann, supra note 4, at 49.
71 See id.
72 See Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat. 745 (2002).
73 Id.
74 Id. § 203.
75 Hamilton & Trautmann, supra note 4, at 52.
76 Sarbanes-Oxley Act § 207.
77 See id.
78 See Robert W. Hamilton, The Law of Corporations In a Nutshell 156–75 (1991).
79 See id.
80 See Hamilton & Trautmann, supra note 4, at 47.
81 See id. at 56.
82 See Sarbanes-Oxley Act § 301.
83 Id.
84 Id. § 204.
85 Id. § 301.
86 Id. § 302.
87 Sarbanes-Oxley Act § 302.
88 Id. § 906.
89 Id. § 307.
90 Id.
91 See id.
92 Hamilton & Trautmann, supra note 4, at 61.
93 Id.
94 See Sarbanes-Oxley Act §§ 401–403
95 Pro forma results are often described to be “as if” results, i.e., they reflect a company’s hypothetical performance had certain actual one-time events and expenses not occurred. Pro forma results do not conform to generally accepted accounting principles (GAAP). See Securities and Exchange Commission, Cautionary Advice Regarding the Use of “Pro Forma” Financial Information in Earnings Releases, at http://www.sec.gov/ rules/other/33-8039.
htm (last visited Apr. 29, 2004).
96 Sarbanes-Oxley Act § 401. GAAP refers to a combination of authoritative standards, set by standard-setting bodies, and the accepted ways of doing accounting. See James D. Cox, Financial Information, Accounting and the Law: Cases and Materials 6–7 (1980).
97 Sarbanes-Oxley Act § 401.
98 Id. § 402.
99 Id. § 403.
100 See id. § 807.
101 Id.
102 Rule 10b-5, 17 C.F.R. § 240.10b-5 (2002).
103 See Hamilton & Trautmann, supra note 4, at 81.
104 See Sarbanes-Oxley Act § 802.
105 Id.
106 Id.
107 See id. § 804.
108 Id.
109 Sarbanes-Oxley Act § 803.
110 See Cunningham, supra note 2, at 4.
111 Craig Karmin & Kevin Delaney, U.S. Regulator Wins Some Praise For Governance Law Exemptions, Wall St. J., Jan. 13, 2003, at M1.
112 See Tamara Loomis, Sarbanes-Oxley Act, New York Law Journal, Jan. 2, 2003, at 5.
113 See Sarbanes-Oxley Act §§ 301–302.
114 See Cunningham, supra note 2, at 8, 13.
115 See id. at 5 n.9.
116 See id.
117 United States German Embassy Website, at http://www.germany-info.org/relaunch
/politics/german_us/facts.html (last visited Apr. 29, 2004).
118 See Cunningham, supra note 2, at 8.
119 See Rolf Birk, Germany, in The Legal Basis of Corporate Governance in Publicly Held Corporations: A Comparative Approach 53, 62–64 (Arthur R. Pinto & Gustavo Visentini eds., 1998) [hereinafter The Legal Basis of Corporate Governance].
120 Id.
121 See Cunningham, supra note 2, at 11.
122 Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, § 301, 116 Stat. 745 (2002).
123 Id.
124 Birk, supra note 119, at 58–60.
125 See Cunningham, supra note 2, at 8 n.30.
126 See id. at 8.
127 Sarbanes-Oxley Act § 302.
128 Craig Karmin & Kate Kelly, Appeal of U.S. Markets Wanes, Wall St. J., Nov. 13, 2002, at M1.
129 See Cunningham, supra note 2, at 11.
130 See id. at 5 n.10.
131 Id.
132 See id. at 9.
133 Id. at 13.
134 See, e.g., Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, § 302, 116 Stat. 745 (2002).
135 Cunningham, supra note 2, at 13.
136 Id. at 9.
137 Id.
138 See Matthew Senechal, Reforming The Japanese Commercial Code: A Step Toward an American Style Executive Officer System in Japan, 12 Pac. Rim. L. & Pol’y J. 535, 544 (2003).
139 See Senechal, supra note 138, at 544; Japan Corporate Auditors Association, The Auditor System in Japan, at http://www.kansa.or.jp/english/about_02.html (last visited Apr. 29, 2004).
140 See Senechal, supra note 138, at 544.
141 See Loomis, supra note 112.
142 Id.
143 Lewis D. Solomon & Alan R. Palmiter, Corporations 195 (3d ed. 1999).
144 James A. Fanto, France, in The Legal Basis of Corporate Governance, supra note 119, at 22.
145 Id. at 23.
146 Id. at 7.
147 See id. at 23.
148 See Loomis, supra note 112.
149 Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, § 307, 116 Stat. 745 (2002).
150 See Loomis, supra note 142.
151 Id.
152 Id.
153 Id.
154 See id.
155 See Cunningham, supra note 2, at 12.
156 See Kellye Y. Testy, Comity and Cooperation: Securities Regulation in a Global Marketplace, 45 Ala. L. Rev. 927, 932–58 (1994).
157 Comity is defined as the informal and nonmandatory courtesy sometimes referred to as a set of rules to which the courts of one sovereignty often defer in determining questions where the laws and interests of another sovereignty are involved. Webster’s Third New International Dictionary 455 (Philip B. Grove ed., 1986).
158 See Testy, supra note 156, at 932–58.
159 See id.
160 See id.
161 See Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat. 745 (2002).
162 See Testy, supra note 156, at 928.
163 See Securities Act of 1933, ch. 38, Title I, § 5, 48 Stat. 77 (codified as amended at 15 U.S.C. § 77e (2002)).
164 Id.
165 Id. § 77b(a)(7).
166 Testy, supra note 156, at 939.
167 See id.
168 Id. at 940–41.
169 Id.
170 Id. at 939.
171 Testy, supra note 156, at 940.
172 Id.
173 Id.
174 Id.
175 Id. at 941.
176 Testy, supra note 156, at 941.
177 See id.
178 Id.
179 Id.
180 Id.; Regulation S, 17 C.F.R. § 230.901–230.904 (2002).
181 Robert B. Robbins & Elizabeth A. Harris, Regulation S Offerings, § Background, July 2002, LEXIS, Sclcle File (ALI-ABA Course of Study Materials—Securities Law for Nonsecurities Lawyers).
182 Id. § Operation of Regulation S.
183 Id.
184 Id.
185 A “road-show” is industry lingo for when an issuer travels to groups of interested investors to market its securities offerings. See, e.g., Mowlam Roadshow for US Investment, BBC News, Oct. 7, 1998, at http://news.bbc.co.uk/1/hi/events/northern_ireland/latest_news/
187848.stm.
186 Robbins & Harris, supra note 181, § Operation of Regulation S.
187 Id.
188 Id. § Background.
189 Testy, supra note 156, at 955.
190 See Securities and Exchange Commission, The SEC: Who We Are, What We Do, at http://www.sec.gov/about/whatwedo.shtml (last visited Apr. 29, 2004).
191 See id.
192 See David L. Ratner, Securities Regulation in a Nutshell 127–45 (1998).
193 Securities Exchange Act of 1934, ch. 404, Title I, § 10, 48 Stat. 891 (codified as amended at 15 U.S.C. § 78j (2002)).
194 Rule 10b-5, 17 C.F.R. § 240.10b-5 (2002).
195 Testy, supra note 156, at 928.
196 Shoenbaum v. Firstbrook, 405 F.2d 200 (2d Cir. 1968) (en banc).
197 See Katherine J. Fick, Comment, Such Stuff as Law Are Made On: Interpreting the Exchange Act to Reach Transnational Fraud, 2001 U. Chi. Legal F. 441, 442.
198 Testy, supra note 156, at 933.
199 Id.
200 405 F.2d at 204–05.
201 Id. at 208.
202 Fick, supra note 197, at 455.
203 Id.
204 Id.
205 See id. at 456.
206 Id.
207 Testy, supra note 156, at 934.
208 See id.
209 Id.
210 Zoelsch v. Arthur Anderson & Co., 824 F.2d 27, 31 (D.C. Cir. 1987).
211 Fick, supra note 197, at 457.
212 Id. at 461.
213 Testy, supra note 156, at 934.
214 Id. at 935.
215 712 F.2d 421 (9th Cir. 1983).
216 Fick, supra note 197, at 459.
217 Testy, supra note 156, at 935.
218 Id.
219 See Restatement (Third) of the Foreign Relations Law of the United States § 416 (1986) (Jurisdiction to Regulate Activities Related to Securities).
220 Id. § 416(1)(d).
221 Id. § 416(2)(b).
222 Testy, supra note 156, at 936.
223 See Stephen J. Choi & Andrew T. Guzman, The Dangerous Extraterritoriality of American Securities Law, 17 N.W. J. Int’l L. & Bus. 207, 222 (1996).
224 See id.
225 See id.
226 See id.
227 See id.
228 Choi & Guzman, supra note 223, at 208.
229 See id. at 221.
230 See id.
231 Id. at 224–25.
232 Id. at 225.
233 Choi & Guzman, supra note 223, at 225.
234 Testy, supra note 156, at 955.
235 See id.
236 See, e.g., Grunenthal GmbH v. Hotz, 712 F.2d 421 (9th Cir. 1983).
237 Id. at 422–23.
238 See Testy, supra note 156, at 934–35.
239 See id.
240 See id. at 933–58.
241 See id.
242 See generally Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat. 745 (2002).
243 See generally id.
244 Id. § 2.
245 See id.
246 Choi & Guzman, supra note 223, at 210.
247 See Sarbanes-Oxley Act § 2.
248 See id.
249 See id.
250 See Loomis, supra note 112.
251 See Sarbanes-Oxley Act § 2.
252 See Cunningham, supra note 2, at 11.
253 See generally Sarbanes-Oxley Act.
254 See Hamilton & Trautmann, supra note 4, at 219 (floor remarks of Sen. John McCain on July 10, 2002).
255 See Stephen Gillers, Regulation of Lawyers: Problems of Law and Ethics 2 (2002); Hamilton, supra note 78, at 6–9; Hamilton & Trautmann, supra note 4, at 20.
256 See generally Sarbanes-Oxley Act.
257 See Ratner, supra note 192, at 32–44, 93–171.
258 See Gillers, supra note 255, at 2; Hamilton, supra note 78, at 6–9; Hamilton & Trautmann, supra note 4, at 20.
259 See Bloomenthal, supra note 3, § 1.
260 See id.
261 See Hamilton & Trautmann, supra note 4, at 206–07.
262 See id. at 205.
263 See Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, §§ 301, 201, 307, 116 Stat. 745 (2002).
264 See Cunningham, supra note 2, at 11.
265 See generally Securities Act of 1933, 15 U.S.C. § 77a to z-3 (2002), and Securities and Exchange Act of 1934, 15 U.S.C. § 78a to ff (2002).
266 See Securities Act of 1933, 15 U.S.C. § 77a to z-3 (2002), and Securities and Exchange Act of 1934, 15 U.S.C. § 78a to ff (2002).
267 See Sarbanes-Oxley Act §§ 301–308.
268 See id.
269 See id.
270 See Cunningham, supra note 2, at 14–16.
271 See id. at 13.
272 See Birk, supra note 119, at 67.
273 See Sarbanes-Oxley Act §§ 101, 302, 307, 406.
274 See Cunningham, supra note 2, at 14–16.
275 Alen Mattich, London Stock Exchange Lures Foreign Firms Listed in U.S., Wall St. J., Jan. 6, 2003, at M1.
276 See Loomis, supra note 112.
277 See id.
278 See Ian H. Giddy, Global Financial Markets 349–50 (1994).
279 See id.
280 See id. at 350.
281 Id.
282 See id.
283 See Giddy, supra note 278, at 350.
284 See Jack Grone, The Davos Debate, Wall St. J., Jan. 27, 2003, at A4.
285 Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat. 745 (2002).
286 See Mattich, supra note 275 (noting that Porsche AG of Germany and Daiwa Securities Group of Japan recently reversed their plans to list on the New York Stock Exchange as a result of SOX).
287 See Craig Karmin & Kate Kelly, New Governance Rules, Corporate Governance Scandals Keep Investors at Bay, Wall St. J., Nov. 13, 2002, at M1.
288 Id.
289 See id.
290 Id.
291 See id.
292 See Karmin & Kelly, supra note 287.
293 Giddy, supra note 278, at 349.
294 Id.
295 Id.
296 See Cunningham, supra note 2, at 5 n.9.
297 Giddy, supra note 278, at 349.
298 See generally Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat. 745 (2002).
299 See Cunningham, supra note 2, at 5 n.9.