Section 802: Overview, definition, and example
What is Section 802?
Section 802 refers to a specific provision found within various laws and regulations. In the context of the U.S. federal law, for example, it is often cited in connection with certain legal requirements under the Sarbanes-Oxley Act (SOX) of 2002, which addresses corporate governance, accounting practices, and financial disclosures. Section 802 of the Sarbanes-Oxley Act focuses on criminal penalties for altering, destroying, or falsifying records in federal investigations or bankruptcy proceedings.
This section outlines severe penalties for those who intentionally tamper with records, including potential imprisonment and significant fines. It is designed to promote transparency and accountability within businesses and prevent fraudulent activities.
Why is Section 802 important?
Section 802 is important because it helps ensure the integrity of financial and business records. By imposing criminal penalties for tampering with or destroying documents, it acts as a deterrent against fraudulent activities that can mislead investors, regulators, and the public. This provision plays a key role in maintaining trust in corporate reporting and governance, ensuring that businesses follow proper accounting practices and remain accountable to stakeholders.
For businesses, compliance with Section 802 is critical to avoid legal repercussions and to uphold the integrity of their financial practices.
Understanding Section 802 through an example
Imagine a corporate executive who orders the destruction of financial documents in order to conceal fraudulent activities or errors in the company’s financial reporting. Under Section 802 of the Sarbanes-Oxley Act, this individual could face up to 20 years in prison and substantial fines for knowingly destroying or falsifying these records, which could be used in a federal investigation or bankruptcy proceeding.
Another example could involve a company’s accountants who knowingly falsify financial statements to mislead investors. Under Section 802, the penalties for such actions would be severe, including imprisonment and fines, to deter financial crimes and ensure that corporate governance remains transparent.
An example of Section 802 clause
Here’s how a Section 802-related clause might look in a contract:
“The parties agree to comply with all provisions of the Sarbanes-Oxley Act, including Section 802, which mandates the preservation of records and documents. Any action to alter, destroy, or falsify records in violation of this provision may result in criminal penalties, including fines and imprisonment.”
Conclusion
Section 802 is a crucial part of corporate governance regulations, particularly in the context of financial transparency and accountability. By setting out clear penalties for tampering with or destroying records, it helps deter fraudulent activities and maintains the integrity of business practices. Businesses must ensure compliance with Section 802 to avoid severe legal consequences and to foster trust with stakeholders, investors, and regulators.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.