What was the primary purpose of the Sarbanes-Oxley Act (SOX)?

The primary purpose of the Sarbanes-Oxley Act (SOX) is to reduce unethical corporate behavior, particularly in the wake of major financial scandals that occurred in the early 2000s, such as the Enron and WorldCom scandals. SOX introduced stringent regulations for financial reporting, internal controls, and corporate governance, aiming to enhance the accuracy and reliability of corporate disclosures. This legislation was designed to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws and to promote transparency in financial reporting.

By imposing stricter penalties for fraudulent financial activity and requiring top executives to personally certify the accuracy of financial information, SOX aimed to establish a culture of accountability within corporations. Thus, the focus of the act is on ensuring ethical conduct and preventing financial malfeasance, making it clear that the reduction of unethical corporate behavior is indeed its primary purpose.