it's called the sarbanes-oxley act of 2002.ause] >> it was overwhelmingly passed by congress and signed by president bush following the last big round of corporate scandals involving enron, tyco, and worldcom. it was supposed to restore confidence in american corporations and financial markets. the sarbanes-oxley act imposed strict rules for corporate governance, requiring chief executive officers and chief financial officers to certify under oath that their financial statements are accurate and that they have established an effective set of internal controls to ensure that all relevant information reaches investors. knowingly signing a false statement is a criminal offense punishable with up to five years in prison. frank partnoy is a highly regarded securities lawyer, a professor at the university of san diego law school, and an expert on sarbanes-oxley. >> the idea was to have a criminal statute in place that would make ceos and cfos think twice, think three times, before they signed their names attesting to the accuracy of

fraud that was going on in the markets in two thousand and two congress passed a law called the sarbanes oxley act which was a regulation for all corporations to implement so that they couldn't have any more typos or enron's or world coms and so i went to a software company specifically because they sold this regulation software in my clients were the world's largest financial services company and so in the midst of bringing them this technology which i thought was going to help clean up the market i discovered through various clients that they wanted it to hide information and that they were actually back doors in the software that facilitated that and that's where i became a whistleblower and you took this information richard this is the most mind blowing part to the government the securities and exchange commission specifically and what did they do when you told them. well actually since two thousand and one the f.c.c. had been investigating my current employer at that time so i contacted them i expected them to say great we kind of know about different angles and this will set in you know

could and me you know it could land me in prison and from there i thought well you know under the sarbanes oxley act it provides the protections for whistleblowers so i then tried to go through court for several years and when that failed when that proved to be a fallacious belief of mine that there were checks and balances like that after proving my case in court after proving everything i stated as a case they dismissed it on a technicality by moving the triggering date of the event after several years of litigation to an earlier date so that the court would be it would be out of their jurisdiction. and then you say that they actually adopted some of the software that had these glaring errors that could facilitate money laundering themselves. well certainly the f.c.c. actually standardize on the exact software from the company that i was working for a couple months after i filed my case i saw a press release from the f.c.c. and my employer my ex employer at that time stating that they had used the new they're implementing that software that i blew the whistle on the how the back doors to help

sarbanes-oxley brought about corporate governance and directors felt vulnerable so they wanted their own lawyer so the ceos were downgraded to the management of the institution. in many cases it was not good. when a board would try to run a company operating in 130 countries and management knows moment to moment, no matter how diligent, it is difficult to have a detailed knowledge of what it takes to run the company. the management travel constantly and our regional executives reporting was on a real-time basis. i could tell ag results by today's anything and wanted to know so strapped a quarter we would know how we we're doing. so in the year 2000 we had transatlantic that we started the year before was a 40% interest i was trying to catch up with senior managers we will show a reduction of reserves it may be down 50 million. what does that mean? when you have reserves, when you pay claims is the normal process. the reserve comes down. transatlantic and we just consolidated had catastrophe losses so they went for the out of 56 million and that is a consequential number. someone said

you referenced sarbanes-oxley are clearly dodd-frank is out there. what kind of specific advice or recommendations would you have about what's the right balance on regulation? at this time. i mean, you have a dodd-frank document that's several thousand pages, and most of the people say they have never read it. but what is the right balance? what is your advice? >> well, i think a company, different degrees of corporate governance, based upon size of the company, and the businesses that it's in. if you have a global company, as an example, in different types of businesses, you have to rely on management. because i don't care how good your directors are endless they will be full-time directives working most of the time at the company, what are they going to know? they know what you tell them. and if you don't have confidence in the management, then get rid of the management and get a new ceo. yes, you have, i visit you have to report to the board -- obviously you have to report to the board. not all report but they have to have information that they wa

you referenced sarbanes-oxley, clearly dodd-frank is out there. what kind of specific advise or recommendations do you have on what's the right balance on regulation at this time? i mean, you have a dodd-frank document that's several thousands pages, and most say they never read it, but what's the right balance? what's your advise? >> well, i think a company, you have to decide what different degrees of corporate governance based upon the size of the company and the businesses it's in. if you have a global company as an example that's in different types of businesses, you have to rely on management because i don't care how good your directors are unless they are full-time directors working most of the time at the company. way are they going to know? they know what you tell them. if you don't have confidence in the management, get rid of the management, you get a new ceo. obviously, you have to report to the board, and not only report to them, but they have to have the information that they want and need, but you can't have them trying to second gu

witness sarbanes-oxley,fyrrhea, i won't go into what these names mean. many of you who study banking law, financial law will know it. each was a new set of powers for regulatory, for regulators who had recently failed. in the case of the financial crisis, financial regulators were quick on the draw with new regulations that would impose more controls on the financial industry. the fed, which arguably was most at fault for failing to see the crisis coming, got the most new powers, becoming in effect the uberregulater of the financial system with the potential eventually to regulate large insurance companies, finance companies, hedge funds and money market mutual funds as well as banks. this is truly a case of not letting a good crisis go to waste. nor has the steam gone out of the regulatory engine yet. if you read the speeches of fed officials and other bank regulators from around the world, you'll find that they are eager to somehow get control of the securities market. the code words here are "shadow banking." a clever suggestion that the securities in

your referenced sarbanes oxley, dodd-frank is out there. in what kind of specific advice or recommendations would you have about the right balance on regulation at this time. i mean, you have a dodd-frank document that is several thousand pages. most of the people said they had never read it. what is the right balance. what is your advice? >> i think different degrees of corporate governance based upon size of the company and the businesses. you have a global company as an example. full-time directors full-time directors, they know what you tell them. and if you don't have confidence in the management unit company. yet to report to the board. yet have the information that they want and need. we never had that problem with the edgy. the directors came to the staff meetings. firsthand what was happening on a day-to-day basis. so you don't try to hold anything back to the directors. it has to be a confidence factor and you cannot frighten the director is by having laws and regulations that make them have to do things that they normally would n

>> there's an interesting parallel that we see going on between what happened in the sarbanes-oxley lawen it was passed, we saw a lot of merger and acquisition activity that took place. a lot of companies basically copitch lating because they couldn't cover the cost. we've got two major pieces of legislation that are taking place right now in the dodd/frank bill, in the financial sector, and in obama care, and in the health care sector. i think you're going to see some of the same things happening. you're going to see a lot of merger and acquisition activity. i like manhattan partners here. >> who gets hardest hit, as a result of obama care and dodd/frank? where are the areas of this market that you want to avoid, given this higher regulatory environment? >> when you see the passage of the sarbanes, you saw a lot of the smaller companies. they merged the together because they needed to get the economies of scale to cover the cost of all that regulation. i think you're going to see some of the same things happening -- >> smaller and mid-cap -- >> exactly. >> rick santelli, we did not for

the reference sarbanes-oxley, clearly dodd-frank is out there. what specific advice or recommendations which you have on the balance of regulation at this time? you have a dodd-frank document that is several thousand pages and most of the people say they've never read it. what is the right talents? >> i think you have to find what different degrees of corporate governance based upon the size of the company in the business that it didn't. if you have a global company as an example in different businesses, you have to rely on management because i don't care how good directors are i'm also full-time direct heirs, what is it going to know? get rid of the management in getting new ceo. obviously you have to report to the board. not only report to them, they have to have the permission they want and need. but she can't have them trying to second-guess the management of the comp me. get rid of the management if you don't trust them. we never had that problem and aig. we invited directors to come to the senior staff meeting to send in what was happening

sarbanes-oxley brought about enormous change in corporate governance, and directors of companies felt vulnerable. and so they all wanted their own lawyer represent him on the board. and what happened is that ceos of companies were really downgraded in the management of an institution. in some cases it may have been good, and in many cases it was not good. when a board was trying to really run a company that's operating in 130 countries, where the management knows moment to moment what's going on, directors, you know, four times a year, no matter how diligent they are, it's rather difficult for them to have a detailed knowledge of what it is today to run that company. the management of aig traveled constantly, on the road constantly. and our regional executives, their reporting was on a real-time basis. we knew what was happening. i could tell aig results by two days i would know anything i wanted to know about the company. it was a real-time basis. so throughout the quarter we would know how we were doing in any part of the world we operate again. so when i was, and i think the year 2

you reference sarbanes-oxley, clearly dr. frank is out there. what specific advice or recommendations would you have the right balance on regulation this time? you have a dodd-frank document is several thousand pages and most of the people say they've never read it. what is the right balance? what is your advice? >> you have to decide what different degrees of corporate governance based upon size of the company in the business that it then. if you have a global company as an example that's an different types businesses, you have to rely on management because i don't care how good your direct desire. unless they're full-time direct or is working most of their time at the company, what are they going to know? they know what you tell them. if you don't have confidence in the management, get a new ceo. yes you have to report to the board. not only purport to them. they have to have the information they want and need, but you can't have them trying to second-guess the management of the company. committed to management if you don't trust them. we neve

you reference sarbanes-oxley, clearly dr. frank is out there. what specific advice or recommendations would you have the right balance on regulation this time? you have a dodd-frank document is several thousand pages and most of the people say they've never read it. what is the right balance? what is your advice? >> you have to decide what different degrees of corporate governance based upon size of the company in the business that it then. if you have a global company as an example that's an different types businesses, you have to rely on management because i don't care how good your direct desire. unless they're full-time direct or is working most of their time at the company, what are they going to know? they know what you tell them. if you don't have confidence in the management, get a new ceo. yes you have to report to the board. not only purport to them. they have to have the information they want and need, but you can't have them trying to second-guess the management of the company. committed to management if you don't trust them. we neve