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Many have debated the cost of Sarbanes-Oxley (SOX) versus its benefits, given the recent accounting scandals that continue to “pile on”. However, according to Harvard Business School professor, Francois Brochet, the little discussed 2002 provision known as Section 403 is actually making a difference for investors and small companies (and with little cost, unlike some costly Section 404 provisions regarding internal controls).   

Questions:

1. What is Section 403 of SOX?

2.  In Brochet’s review of more than 50,000 filings of insider trades, what was the benefit of Section 403? Why is this important?

3. What is a Form 4 filing?

4. What measures did the article say that some companies are taking to prohibit executives from making trades based on material nonpublic information?

Source: Johnson, Sarah. (2010). Something to Like about Sarbox, CFO.com, April 14. (Retrievable online at http://www.cfo.com/blogs/index.cfm/l_detail/14491100?f=blog_mostrecentpost)

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