Glass-Steagall Act / the Sarbanes-Oxley Act / Dodd-Frank Act /

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(i) Glass-Steagall Act (1933)

Great Depression

At the time after the stock market crash (1929), during the Great Depression, most of the people agreed that the main cause for the event was the “improper banking activity” which was mainly seen as the bank involvement in the stock market investment. Banks were taking high risks in hope for rewards, they were “accused of being too speculative in the pre-Depression era” (HEAKAL, 2010, pg.1). They were not only investing their assets, but they were also buying issues in order to resale them to the public. Nearly five thousand banks failed in the U.S. during the Great Depression. As a result of that most people wouldn’t trust the U.S. financial structure anymore. In order to rebuild the
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The act is administered by Securities and Exchange Commission (SEC), which settles deadlines for compliance and publishes rules on requirements that define what records need to be stored and for how long. Interestingly, SOX does not effect only the financial side of corporations but also the IT department which are entitled to store the corporation’s electronic records. The act states that electronic messages and records must be stored for a minimum of five years (SEARCHCIO, n.a.).

According to Cosgrove (2006) some other main provisions are: the establishment of the Public Company Accounting Oversight Board (PCAOB) to set auditing standards; a stricter definition of auditor independence that restricts the types of consulting services an auditing firm may provide their clients; and a stricter criminal penalties for corporate fraud. Stephens and Schwartz (2006) say that the area that got more attention from the press was the implementation and documentation of internal control systems which help ensure the integrity of financial information being reported to the public. This, out of the other areas, is going to be the most expensive for public companies to implement.

Impacts and results

According to Koehn and Vecchio the SOX Act was the most significant change to security laws since 1934. The popular and financial press has identified certain intended and unforeseen consequences, such as: contraction of the audit market,
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