Corporate and Criminal Fraud Accountability Act – Overview and Summary of Requirements

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By: Staff Editor
Date: October 07, 2011

Sections 801 to 807 of the Sarbanes Oxley Act of 2002 are known collectively as the Corporate and Criminal Fraud Accountability Act. The Act details criminal penalties for securities fraud and protects employees-turned-whistleblower of publicly traded companies from retaliatory actions by their employers.

The Corporate and Criminal Fraud Accountability Act includes the following sections: Section 801 Short Title Section 802 Criminal Penalties for Altering Documents Section 803 Debts Nondischargeable if Incurred in Violation of Securities Fraud Laws Section 804 Statute of Limitations for Securities Fraud Section 805 Review of Federal Sentencing Guidelines for Obstruction of Justice and Extensive Criminal Fraud Section 806 Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud Section 807 Criminal Penalties for Defrauding Shareholders of Publicly Traded Companies Criminal penalties for altering documents

According to the Corporate and Criminal Fraud Accountability Act, it is illegal for any individual to carry out the following activities with respect to documents that pertain to federal investigations and bankruptcy filing processes:

Alteration
Destruction
Mutilation
Concealment
Cover up
Falsification
Making false entries

Such an illegal activity is punishable by the imposition of fines or the maximum of a 20 year jail sentence or both.

Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud

This section of the Act deals with whistleblower protection. Publicly traded companies cannot threaten, harass or discriminate against employees who turn whistleblowers. According to the Act, a whistleblower is an employee who:

Provides information regarding violations of SEC regulations
Files, testifies or participates in proceedings regarding SEC violations

Employees who feel they’ve been discriminated against for turning whistleblower can file a complaint with the Secretary of Labor as OSHA is the federal agency enforcing the whistleblower provisions of the Corporate and Criminal Fraud Accountability Act.

Employees who win their discrimination cases are entitled to compensatory damages and monetary settlements.

Need to improve your knowledge of Sarbanes Oxley compliance? Then attend any of the following ComplianceOnline webinars:

Sarbanes-Oxley Compliance and Internal Control for Small and Medium Businesses
Accounts Receivables: How to Ensure Sarbanes-Oxley Compliance
The Sarbanes-Oxley Law: Quality & Environmental Management Systems Can Reduce the Risk
Sarbanes-Oxley, IT and Segregation of Duties

Criminal Penalties for Defrauding Shareholders of Publicly Traded Companies

The Corporate and Criminal Fraud Accountability Act makes the following illegal with respect to securities fraud:

Individuals or firms cannot knowingly carry out or attempt to carry out schemes that defraud individuals in connection with a publicly traded securities
Individuals or firms cannot knowingly carry out or attempt to carry out schemes that obtain, by fraudulent means any money or property in connection with the purchase or sale of any security of an issuer with publicly traded securities