Medical Device Link.

Originally Published MX March/April 2003

GOVERNMENTAL & LEGAL AFFAIRS

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. The act effects changes in Securities Exchange Commission (SEC) regulations in response to the recent well-publicized corporate scandals and stock market declines. Principal components of the act include the following.

• Increased issuer and management disclosure.
• Enhanced corporate governance rules and responsibilities.
• Mandated auditor independence.
• Creation of the Public Company Accounting Oversight Board.
• New and enhanced fraud and criminal penalties.
• Substantial regulations regarding audit committee procedures.

An area of the act that has attracted a significant amount of the spotlight is the requirement that the CEOs and CFOs of publicly traded companies must certify each filed annual report, each quarterly report, and each filed periodic report containing financial statements.

The act relies heavily on SEC rule making for implementation of its specific regulations. At this time, many SEC regulations have been proposed and some have been adopted. There are also other current regulatory initiatives, including the securities exchanges' pending corporate governance initiatives. Because such rule making and initiatives are still developing, the final impact of the act is not entirely clear.

What is clear is that public companies, their boards, management, and advisers will be subject to intense real-time and hindsight scrutiny. This atmosphere requires that both in-house and outside counsel quickly become familiar with the new regulations as they are adopted and focus on procedures and safeguards to minimize clients' exposure to the significantly enhanced civil and criminal penalties of the act.

Copyright ©2003 MX