Edited by Claude Ménard and Michel Ghertman
Chapter 11: The Sarbanes–Oxley Act at a Crossroads
Roberta Romano INTRODUCTION The history of US federal securities regulation can best be characterized as one of gradual expansion of regulatory scope within, in essence, a disclosure regime. The regulatory approach that the landmark federal legislation of the 1930s took is one of disclosure, in contrast to the then substantive regulatory approach of most states’ securities laws, which prohibited the sale of securities not meeting state regulators’s approval. The greatest expansion thereafter occurred in the 1960s, when stock traded in the overthe-counter market and cash tender offers were brought under the federal ambit.1 But Congress periodically has revisited the scope of federal regulation, requiring, in the 1970s, public companies to maintain accurate books and records, in the wake of the revelation of US companies having made questionable payments to foreign officials,2 and increasing the sanctions against insider trading in the 1980s, after a series of high-profile cases of insider trading involving hostile takeovers.3 By the 1990s, however, the regulatory imperative took another turn, as Congress focused on class actions and enacted legislation restricting private civil litigation for securities violations.4 The Securities and Exchange Commission (‘SEC’), by contrast, has consistently increased required disclosures, action it can undertake without the need for congressional authorization. The only instances in which the SEC has cut back on its regulatory reach have occurred where it has experienced competitive pressure from other regulatory jurisdictions, such as in adoption of shelf registration rules, that sought to curb the exodus of US debt offerings into the unregulated...
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