Ethical Hacking Essentials Practice Test

Which civilian act is designed to protect investors and the public by increasing the accuracy and reliability of corporate disclosures?

1. Sarbanes - Oxley Act

2. Gramm-Leach-Bliley Act

3. Dodd-Frank Wall Street Reform Act

4. Securities Act of 1933

The correct answer is: Sarbanes - Oxley Act

The Sarbanes-Oxley Act, enacted in 2002, is focused on enhancing corporate governance and accountability in response to financial scandals that highlighted significant lapses in corporate financial reporting. This legislation mandates stricter regulations for financial disclosures, aiming to increase transparency in financial statements. It requires companies to establish internal controls for financial reporting and imposes severe penalties for fraudulent financial activity. The overarching goal is to protect investors and the public by ensuring that corporate disclosures are accurate and reliable, thus fostering greater trust in the securities markets. In contrast, the Gramm-Leach-Bliley Act primarily addresses the regulation of financial institutions and their affiliates, allowing them to consolidate and provide a wider range of financial services. The Dodd-Frank Wall Street Reform Act focuses on reducing risks in the financial system and enhancing consumer protections but is broader in scope than just corporate disclosures. The Securities Act of 1933 was one of the first major laws regulating the securities industry, focusing more on the requirement of registration for securities and the necessity of providing prospective investors with comprehensive information but predates the Sarbanes-Oxley Act and does not cover the same range of corporate governance issues.