WALL STREET REFORM

August 2002
		How will the Bush administration and Congress clean up Wall Street and restore investor confidence in the wake of corporate scandals?

Forum Introduction Do stock options act as invitations for corporate fraud and misleading financial statements? Did Enron's trading of energy futures on the Commodity Futures Exchange enable it to mislead investors? How much should people with mutual funds worry about corporate corruption and accounting scandals? What is the role of a corporate board of directors? Will the conviction of corporate executives have any real influence on the markets? What would have happened if legislation to privatize a portion of Social Security had been approved? What happened to all the money that people lost -- was it ever 'real'? Why not limit the amount of time an accounting firm can serve as a company's independent auditors?   Online Special: Corporate Ethics Enron: After the Collapse Browse Online NewsHour coverage of business and economy

In the wake of several massive corporate failures -- Enron, Global Crossing and WorldCom, among others -- and episodes of accounting misconduct, the U.S. stock markets have plummeted. As public outrage against corporate "bad apples" in business appears on the rise, Congress overwhelmingly approved a corporate reform bill designed to restore investor confidence in the nation's financial markets. The new legislation calls for tougher penalties for business fraud and stricter oversight of the accounting industry. The bill, largely crafted by Sen. Paul S. Sarbanes (D-Md.), would create an independent board to oversee the accounting industry and to discipline errant auditors. The Securities and Exchange Commission would select the members for the Public Company Accounting Oversight Board and ratify any auditing standards the new panel recommends. The bill would keep accounting firms from selling consulting or other services to the companies they audit. Under the legislation, corporate chief executive officers and chief financial officers must vouch for the accuracy of their companies' financial statements. If the statements are found to be misleading or falsified, corporate officers -- though not board members -- could face up to 20 years in jail. President Bush signed the reform bill late July, hailing it as the most far-reaching reform of American business practices since the Depression. What are the most significant reforms of this bill? How does it best protect investors? And, is it significant enough to restore confidence in the U.S. markets? Frank Torres, the legislative counsel for the Consumers Union, Olivia Kirtley, former chair of the AICPA board, and Ronald Berenbeim, director of the global ethics program at the Conference Board answer your questions.