Sarbanes-Oxley, the SEC and Nasdaq

Historically, a company preparing for an initial public offering has taken few corporate steps to prepare for post-offering compliance. Perhaps the issuer would establish an audit committee, add one or two independent directors and instruct directors and officers with respect to the insider trading reports and prohibitions. But generally, the corporate compliance practices employed by a private company seemed sufficient for the new public company. With the enactment of the Sarbanes-Oxley Act in 2002 (the Act) and the imminent adoption of new governance rules by the stock exchanges and Nasdaq, corporate compliance procedures have been expanded for existing public companies, and the level of preparation for corporate compliance following an initial public offering has been substantially increased. This article briefly summarizes the numerous provisions of the Act, the rules under it, the corresponding proposed governance rules that a new public company listing on the Nasdaq National Market will be required to address, and the deadlines for being in compliance.