Left in the Dark: Sarbanes-Oxley and Corporate Abuse of 401(k) Plan Blackout Periods

The enactment of the Sarbanes-Oxley Act of 2002 seeks to build upon and strengthen existing securities regulation to guarantee that corporate abuse ala Enron does not slip through the cracks of the securities laws. Section 306 of the Sarbanes-Oxley Act addresses two key issues that seek to prevent e...

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Bibliographic Details
Published in:The Journal of corporation law 2004-07, Vol.29 (4), p.801
Main Author: Klaas, Kara M
Format: Article
Language:English
Subjects:
Deferred compensation
Defined benefit plans
Employee stock ownership plans
Employees
Employers
ESOP
Executives
Federal regulation
Fraud
Insider trading
Investments
Management decisions
Mismanagement
Pension fund management
Pension plans
Profit sharing plans
Public Company Accounting Reform & Investor Protection Act 2002-US
Retirement income
Retirement plans
Scandals
Securities regulations
Wages & salaries
Workers
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Summary:The enactment of the Sarbanes-Oxley Act of 2002 seeks to build upon and strengthen existing securities regulation to guarantee that corporate abuse ala Enron does not slip through the cracks of the securities laws. Section 306 of the Sarbanes-Oxley Act addresses two key issues that seek to prevent executive manipulation of blackout periods. First, 306 responds specifically to one of the more egregious abuses that came to light after the demise of Enron - corporate executives who manipulated the 401(k) system by trading during blackout periods. Second, 306 mandates advance, written notification to investors of blackout periods to allow them to make informed decisions about modifying their 401(k) holdings prior to the beginning of the blackout period. This Note evaluates the changes brought into effect by 306, namely, the prohibition of insider trades during 401(k) pension blackout periods and the required advance notice of blackout periods, and evaluates the effectiveness of this section in truly protecting the employee-investor.
ISSN:0360-795X