Do SOX non-compliance warnings exist? 2452

  • Is there any kind of warning issued to listed companies for non-compliance with SOX?
    I can’t find any evidence that these warnings exist, but my thesis advisor believes that they do.
    I can find information about comanies investigated by the SEC then charged through the courts, but nothing that would consitute a formal warning.
    Many thanks.

  • Hi Ameise,
    Well your thesis advisor should be more specific instead of just having ‘a feeling’ that something may exist.
    The staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC) conducts reviews of the filings of issuers that have securities registered with the SEC. Those reviews are conducted on a sample basis, so not every annual report of a foreign private issuer on form 20-F gets reviewed every year. If the SEC has questions or thinks that the report should be amended and that additional disclosure should be included in the report, the SEC issues a letter to the issuer. You can find those letter in EDGAR on under the form type ‘correspondence’.
    In addition, the U.S. national securities exchanges also review whether listed companies comply with the repsective stock exchange’s listing rules. As far as I know they will also inform the issuer of his non-compliance and warn the issuer that it will be delisted if it does not fix the problem. A part of the stock exchanges’ listing rules are based on certain minimum requirements stipulated in the Sarbanes-Oxley Act (e.g. requirements for the independence of audit committee members, requirements for audit committee financial experts, requirements for code of ethics for the CEO and senior financial officers, etc.).
    Where are you based? If you want you can also ask me questions in German. I am based in Zurich.
    Best regards

  • Hi,
    I agree with _at_gmerkl that the question about the existence of warnings is vague and requires clarification to provide a proper response.
    If a registered entity fails to comply with SOX requirements, the auditor can render a qualified opinion on the internal controls over financial reporting (ICFR).
    The audit opinion is then published in the audited financial statements and the market/investor community acts accordingly as reflected in the Company’s share price.
    To my knowledge, I have not heard of formal warnings that may be issued by a governmental body. As stated in the previous post, legal impact is usually determined by the Courts.

  • I agree with the previous posters. In particular milan is correct to point out that the auditor, first and foremost, should identify any failures to comply with SOX and report accordingly.

  • Thank you very much for your kind assistance.
    Thanks for the offer Georg - I am based in Germany, but my English is much better than my German. I will have a look in EDGAR to see if there is something there that I can use for my study. So far it looks like a great resource.
    I also came across the NYSE Public Reprimand Letter, introduced with other corporate governance reforms in response to SOX, which may also be what my adviser was referring to.
    Thanks again.

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