There have been several laws that have been passed to regulate the American financial companies. In 2002, the Congress passed the Sarbanes-Oxley Act while in 2010, President Obama signed the Dodd-Frank Wall Street Reform Amendment (Kerschberg, 2011). The two legislation have a significant influence on the practices of American companies. The legislations have several similarities and differences.
The major similarity between the two acts is that they were passed to protect whistleblowers of the financial services company. For instance, when employee notices that there is fraudulent operation in the company, they can report the fraud to the relevant authorities. The employer cannot be victimized, for instance, unfair dismissal. The employee should also be given protections against threats by the management of the company (Kerschberg, 2011).
The key disparity between the two acts is that Sarbanes Act was enacted mainly to protect investors from fraudulent accounting by companies, for example, a company that underestimates expenses so that its profits can increase. There have several in cases of accounting fraud before the enactment of the law, the famous being at the Enron, Tyco International and WorldCom that was uncovered in 2001. On the other hand, Dodd-Frank was passed in 2008 to enact significant financial reforms to reduce financial crisis in the market such as unethical swaps and derivatives that are undertaken by the management of the company (Ferran, 2012).
In conclusion, the Dodd-Frank and Sarbanes-Oxley have led to significant improvement in the performance of American companies. The two acts are similar because they protect the whistleblowers that notice fraud in a company and pass out the information to the public. The only difference between the two acts is that Dodd-Frank was amended to control the financial crisis in 2008 while Sarbanes-Oxley was enacted to counter fraud in company’s’ financial reporting.
- Ferran, E. (2012). The regulatory aftermath of the global financial crisis. Cambridge: Cambridge University Press.
- Heissner, S. (2015). Managing business integrity: Prevent, detect, and investigate white-collar crime and corruption.
- Kerschberg, B. (2011). Forbes Welcome. Forbes.com. Retrieved 4 February 2016, from http://www.forbes.com/sites/benkerschberg/2011/04/14/the-dodd-frank-acts-robust-whistleblowing-incentives/#2715e4857a0b27fa08f71193
- Klein, L. R., Dalko, V., & Wang, M. H. (2012). Regulating competition in stock markets: Antitrust measures to promote fairness and transparency through investor protection and crisis prevention. Hoboken, NJ: Wiley.