Once the credit crunch really started hitting home, there was a surge in the rhetoric surrounding Sarbanes-Oxley. Some used the crisis as an opportunity to pillory the law, for what it did to Wall Street and companies that wanted to go public. Others suggested the need for a new version of Sarbox to rein in "rogue" financial services firms. Most assume that lawmakers want to re-regulate the financial services industry, and we'll likely see some comprehensive attempts at that this year.

As of right now, we're seeing some interesting attempts to extend specific Sarbox provisions. Here are some examples:

• Auditors of private broker-dealers: Rep. Paul Kanjorski has introduced a bill to close what some see as a loophole that allowed Bernard Madoff's tiny auditing firm to avoid scrutiny. His proposal would give the Public Company Accounting Oversight Board the ability to inspect, examine and discipline auditors of private broker-dealers as well as public broker-dealers. Recall a new rule requires all auditors of broker-dealers to register with the PCAOB. Kanjorski's proposal would go even further.
• Clawbacks: We note elsewhere in this newsletter that Sarbanes-Oxley did in fact contain a clawback, but it was limited to chief executive officers and chief financial officers who were found to be engaged in financial fraud. Corporate boards have been slowly embracing the concept. We may see a surge in the number of companies that institute such provisions. Recall Morgan Stanley made news by embracing the idea.
• Whistleblowers: We've noted that whistleblowers have fared poorly under Sarbanes-Oxley, as OSHA decided that the law didn't apply to employees of subsidiaries of holding companies. This effectively wipes out the protection for most whistleblowers. That has certainly caught the attention of some senators. We may see some redress at some point. We've already seen an extension of whistleblower protections via the Stimulus act signed in February. The new protections cover private employers and state and local governments who disclose waste, fraud, gross mismanagement, or a violation of law related to stimulus funds.

So what should we make of all this? The rhetoric will continue to fly, and the law will certainly continue to be a lightening rod. But in very specific ways, the law has proven to be quite groundbreaking. It lives. - Jim