Monday, January 19, 2004

Clarifications?

The Enron response legislation, called SOX, was a collection of assignments from Congress to the SEC, the Securities Exchange Commission. Of course, the big hitters were deferred to the last date politically possible. 404 of SOX is the Big Bertha for USA commerce. 404 says to management, in effect, assert what you will, as usual - just attend your assertion with evidence that can be independently audited back to its data sources that will rationally lead to the same conclusion. If your assertion proves to be wrong, and it is unsupported by evidence even if independently attested, you will not be immune from class action for damages. 404 erodes the business judgment rule "shield" for management. First time. Ever. It also makes the attestor firms liable for damages. Other parts of SOX nail senior management with the responsibility for damage, no matter what. Liability cannot be transferred and Congress forbids insurance companies from compensating corporate executives for tort-class violations. Jolt city.

You can get several hundred lawyer firm newsletters to their clients about 404 on a WWW search. Read any five and you've read them all. Ron Prichard is enjoying windfall business (internal control risk management services) from this legislation and keeps us informed weekly as to status of compliance. Chat is 100% Action is 1%. Are there some reliable time lag estimates for this mess rafting to English shores?