Blogging Employee Benefits

March 3, 2006

Clarification of SOX 402 Loan Ban Sought

Filed under: Loans, SEC — Fuguerre @ 8:23 am

Recommendation IV.S.10: Clarify the Sarbanes-Oxley Act Section 402 loan prohibition.

Included in a more extensive report I’ll come back around to this weekend, the SEC’s Advisory Committee of Smaller Public Companies advises that the agency’s Division of Corporation Finance should provide interpretive guidance on §13(k) of the Exchange Act, added by Sarbanes-Oxley Act §402, which prohibits public companies from extending personal loans to directors or executive officers. The Advisory Committee specifically seeks clarification regarding cashless exercise of stock options, indemnity advances, relocation accommodations for new hires, and split dollar insurance policies. If approved by independent directors, the Advisory Committee believes that those transactions are not likely to lead to the abuses that led to SOX 402. [SEC File No. 265-23]

Add participant loans from 401(k) accounts and other qualified retirement plans to that list (but in those cases, subject only to terms of the plan, sans approval of the individual transactions by independent directors).


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