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Willingness to Limit SOX Application?

By Lucinda A. Low and Leigh A. Bacon

On May 12, 2004, the U.S. Court of Appeals for the Ninth Circuit issued its opinion in Securities and Exchange Commission v. Yuen et al., No. 09-56129, D.C. No. CV-03-03124-MRP (9th Cir. May 12, 2004), the first appellate holding under Sarbanes-Oxley. The Sarbanes-Oxley legislation, enacted in 2002 (as Public Law No. 107-204), was designed to strengthen corporate governance of publicly traded companies in the wake of recent corporate accounting and fraud scandals. Sarbanes-Oxley (SOX) represents the most far-reaching corporate governance and securities law reform since enactment of the first federal securities laws in the 1930s, and has given a variety of new tools to enforcement agencies. The Yuen decision suggests, however, that the courts might not defer to enforcement agencies' interpretation of the statute, especially where no implementing regulations have been enacted.

The Case

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