Major Keys Flashcards
What did the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 help establish?
E.g. What policies were established from these (2) acts?
These acts helped establish:
- Financial Stability Oversight Council; and
- Bureau of Consumer Financial Protection
What is the “Clawback” provisions?
A policy defining how to recover performance-based executive compensation after a financial restatement
E.g. Under Dodd-Frank, an issuer (i.e. Public Company) must have a “clawback” policy
What are Bylaws?
Documents that:
(1) Govern the internal structure and operation of a corporation
(2) contain specific rules for the management of a business corporation
NOTE: Initial bylaws are adopted by the incorporators or the board.
What are the penalties for a CEO and CFO for violating the Sarbanes-Oxley Act of 2002?
- Forfeiture of bonus or other incentive-based compensation
- Prohibited from serving as an officer or director
- Forfeiture of profits received from the sale of the issuer’s stock
WHAT is a requirement of issuers (i.e. Public Companies) according to the Sarbanes-Oxley Act of 2002?
An issuer must have an Audit Committee
E.g. Section 301 of the Sarbanes-Oxley Act requires issuers to have an audit committee (with at least 3 Members)
WHAT is the purpose of corporate governance?
A. Satisfying the desires of stakeholders
B. Directing the actions of the corporation
C. Helping the corporation effectively and efficiently accomplish their objectives
WHAT is the rule under SOX regarding the reporting of violations?
Submissions should be made anonymously; and should be confidential
HOW can Senior management best promote an ethical culture within an organization?
BY - Setting an example of ethical conduct
E.g. Setting the “tone at the top”
WHAT is the general rule for personal loans to issuer executives under the Sarbanes-Oxley Act of 2002?
Under the Sarbanes-Oxley Act, personal loans from an issuer to its executives are generally PROHIBITED
WHAT is an advantage of preferred shareholders over common shareholders?
Preferred shareholders have:
- a contractual right to receive dividends; and distributions before common shareholders
E.g. Preferred Shareholders’ have the right to receive dividends and liquidation distributions first
NOTE: Preferred Shareholders’ usually do NOT have voting rights
WHAT are some key responsibilities of a corporation’s officers?
- Carrying out the entity’s day-to-day operations
NOTE: They may also enter the corporation into legally binding contracts
WHAT statements must be included in an annual report under Sarbanes-Oxley Act of 2002?
A Statement that:
1 - Management has taken responsibility for establishing and maintaining an adequate system of internal control over financial reporting
2 - The internal control model used to design and assess the effectiveness of the internal control system
3 - An assessment of whether internal control over financial reporting is effective
4 - An independent public accounting firm that is registered with the PCAOB also has assessed the system
WHAT are considered (2) basic corporate documents?
- Articles of incorporation
2. Certificates of Incorporation
WHAT are the MOST important acts of the Shareholders’?
A.) Amending the articles of incorporation
B.) Voting on any matter requiring a general vote
C.) Electing or removing directors
WHAT are the required actions of a fiduciary?
To act primarily for the benefit of another person (e.g. a corporation)
E.g. Fiduciary requirements of an officer or director are to:
- Act in corporation’s best interests
- Be Loyal
- Use due diligence in carrying out their responsibilities
- Disclose conflicts of interest
