Section 401(a): Disclosures in Periodic Reports; Disclosures Required.

Each financial report that is required to be prepared in accordance with GAAP shall “reflect all material correcting adjustments . . . that have been identified by a registered accounting firm. . . .”

“Each annual and quarterly financial report . . . shall disclose all material off-balance sheet transactions” and “other relationships” with “unconsolidated entities” that may have a material current or future effect on the financial condition of the issuer.

The SEC shall issue rules providing that pro forma financial information must be presented so as not to “contain an untrue statement” or omit to state a material fact necessary in order to make the pro forma financial information not misleading.

Section 401 (c): Study and Report on Special Purpose Entities.

SEC shall study off-balance sheet disclosures to determine a) extent of off-balance sheet transactions (including assets, liabilities, leases, losses and the use of special purpose entities); and b) whether generally accepted accounting rules result in financial statements of issuers reflecting the economics of such off-balance sheet transactions to investors in a transparent fashion and make a report containing recommendations to the Congress.

Section 402(a): Prohibition on Personal Loans to Executives.

Generally, it will be unlawful for an issuer to extend credit to any director or executive officer. Consumer credit companies may make home improvement and consumer credit loans and issue credit cards to its directors and executive officers if it is done in the ordinary course of business on the same terms and conditions made to the general public.

Section 403: Disclosures of Transactions Involving Management and Principal Stockholders.

Directors, officers, and 10% owner must report designated transactions by the end of the second business day following the day on which the transaction was executed.

Section 404: Management Assessment of Internal Controls.

Requires each annual report of an issuer to contain an “internal control report”, which shall:

(1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and

(2) contain an assessment, as of the end of the issuer’s fiscal year, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.

Each issuer’s auditor shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this section shall be in accordance with standards for attestation engagements issued or adopted by the Board. An attestation engagement shall not be the subject of a separate engagement.

The language in the report of the Committee which accompanies the bill to explain the legislative intent states, “—the Committee does not intend that the auditor’s evaluation be the subject of a separate engagement or the basis for increased charges or fees.

Directs the SEC to require each issuer to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code.

Directs the SEC to revise its regulations concerning prompt disclosure on Form 8-K to require immediate disclosure “of any change in, or waiver of,” an issuer’s code of ethics.

Section 407: Disclosure of Audit Committee Financial Expert.

The SEC shall issue rules to require issuers to disclose whether at least 1 member of its audit committee is a “financial expert.”

Section 409: Real Time Disclosure.

Issuers must disclose information on material changes in the financial condition or operations of the issuer on a rapid and current basis.