SOX HAS REQUIREMENTS PERTAINING TO AN ETHICS PROGRAM FOR PUBLIC COMPANIES
Section 406 of The Sarbanes-Oxley Act of 2002 requires public companies to disclose if it has adopted a Code of Ethics for its Senior Financial Officers:
“The [US Securities and Exchange Commission] shall issue rules to require each issuer [i.e. public company], together with periodic reports required pursuant to…The Securities Exchange Act of 1934, to disclose, whether or not, and if not, the reason, therefore, such issuer has adopted a Code of Ethics for senior financial officers, applicable to its principal financial officer and comptroller or principal accounting officer, or persons performing similar functions.”
Section 406(c) defines ‘Code of Ethics’ as standards that promote: “(1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (2) full, fair, accurate, timely, and understandable disclosure in the periodic reports required to be filed by the issuer; and (3) compliance with applicable governmental rules and regulations.”
[Effected by the SEC on January 15, 2003.]
Section 301 Public Company Audit Committees amends the Securities Exchange Act of 1934 pertaining to standards relating to audit committees: “Each audit committee shall establish procedures for (a) the receipt, retention, and treatment of complaints received by the issuer regarding accounting, internal accounting controls, or auditing matters; and (b) the confidential, anonymous, submission by employees of the issuer of concerns regarding questionable accounting or auditing matters.”
Section 806 Protection for Employees of Publicly Traded Companies who Provide Evidence of Fraud amends USC chapter 73, title 18 to include “whistleblower protection for employees of publicly traded companies.” [Whistleblower protection also applies to private organizations per Section 1107 Retaliation against Informants which amends USC section 1513, chapter 73, title 18.]
In effect, there must be an employee Ethics Hotline to the Audit Committee.
CANADIAN SARBANES-OXLEY OR C-SOX ALSO REQUIRES PUBLIC COMPANIES TO HAVE AN ETHICS HOTLINE
Bill 198 (Keeping the Promise for a Strong Economy Act, Budget Measures, 2002) amended the Ontario Securities Act requiring that
(7) an Audit Committee must establish procedures for:
(a) the receipt, retention and treatment of complaints received by the issuer regarding accounting, internal accounting controls, or auditing matters; and
(b) the confidential, anonymous submission by employees of the issuer of concerns regarding questionable accounting or auditing matters
(see MI 52-110 Audit Committees, 2.3 Audit Committee Responsibilities)
In effect, there must be an employee Ethics Hotline to the Audit Committee.