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Criminal penalties for SOX Act violations can be significant

The Sarbanes-Oxley (SOX) Act was enacted nearly 20 years ago, in 2002, in the wake of the Enron and other corporate scandals. These scandals involved executives, with the help of their accountants, overstating their assets, hiding liabilities and otherwise misrepresenting their companies’ financial health to keep investors and others from finding out how much trouble they were in.

The Sarbanes-Oxley Act (named for the two congressmen who spearheaded the legislation) put stringent requirements in place for publicly held companies and their accountants. 

Requirements and penalties included in the SOX Act

Namely. companies must implement internal controls to ensure the accuracy of their financial statements and the top executives have to certify that their financial reports are accurate. Thanks to the SOX Act, accounting firms are now regulated more closely than they previously were. Whistleblower protections for employees who exposed wrongdoing also came out of this law.

It’s not an uncommon assumption that those who are found guilty of violating the SOX Act are subject only to financial penalties. In fact, they can also face federal criminal penalties. For example, in addition to the potential for a $5 million fine, an executive who “willfully” certifies a financial statement that they know doesn’t comply with the law could face a prison sentence of up to 20 years. 

The SOX Act also makes it a criminal offense to destroy or falsify records for the purpose of interfering with an investigation. This offense also carries a potential 20-year prison term for an executive. Further, accountants and auditors can face a 10-year prison term for not maintaining financial documents for the required period.

If you’re facing an investigation or charges related to violations of the SOX Act, it’s crucial that you seek experienced legal guidance to protect your rights and help protect your business.