Why was Sarbanes-Oxley Enacted?
United States Federal legislation known as the Sarbanes-Oxley Act (SOX), may
be described as an offshoot of what Alan Greenspan once called the period of “irrational
exuberance”. This is because when the hallucinations of the late 1990’s in the stock
markets began to fade in March 2000, when investors recognized that a financial bubble
had arisen and then drove stock prices plunging,
the ugliness of “irrational exuberance”
began to appear. The terrorist attacks on September 11, 2001 only exasperated this
hidden reality because it sent the financial markets into frenzy, creating widespread
uncertainty within the minds of the investing public, driving down stock prices even
Looking back, the new war on terrorism took a significant toll on the American
economy and pushed it deep into a recession.
Between December 2001 and July 2002, four major U.S. companies filed for
bankruptcy: Enron, Adelphia, WorldCom, and Global Crossing
and mirrors accounting business models of the 1990s began to surface in late-2001,
wheels of change began to grind in favor of new legislation that some now simply call
Lawrence A. Cunningham, Professor of Law & Business, Boston College,
Speech delivered to the Federation of European Securities Exchanges’ 7th European
Financial Markets Convention in London (June 12, 2003).
Business Cycle Dating Committee, National Bureau of Economic Research 8, (Nov. 2001),
http://www.nber.com/cycles/november2001/recessions.pdf (discussing and pinpointing the beginning of
2001 recession at the same time discussing the impact Sept 11 had our markets).
Jennifer S. Recine,
Examination of the White Collar Crime Penalty Enhancements in the Sarbanes-
Am. Crim. L. Rev
. 1535, 1537 (2002)