Legislation of ethics

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In the wake of the Enron affair and other scandals, investors lost faith in the American capital market. In order to restore public faith, the Sarbanes Oxley Act (2002) was enacted in the United States of America. Section 406 of this law obligates public corporations to adopt a Code of Ethics for Senior Financial Officers.

In accordance with the requirements of the United States Securities and Exchange Commission (SEC), the New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASD) added a requirement that public companies listing with them adopt a Code of Ethics for all employees. This requirement was also adopted by the Financial Industry Regulatory Authority (FINRA), which was formed in 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the NYSE.

Another impetus for ethical behavior on the part of various organizations (not necessarily public corporations) is the 2004 update of the United States Federal Sentencing Guidelines, which detail the requirements for an effective ethics program and emphasize the punitive measures that can be expected in their absence.

Israeli legislation is in advanced stages of approval:

  • Similarly to Sect. 406 of the Sarbanes Oxley Act (2002) and the additions indicated above, the Israeli law, i.e. the Amendment to Securities Regulation (Periodic and Immediate Reports) (Correction) of 2004, obligates public corporations to adopt a Code of Ethics or explain why they have refrained from doing so. The content of the code is applicable to all members of the organization.
  • A private members bill for the cultivation of ethics in organizations was tabled at the Knesset on August 4, 2004. This bill details what is required from a Code of Ethics in organizations.

We at VM are closely following legislative developments in order to provide our customers with the most up-to-date and accurate information at any given moment.

The structure of our ethics programs meets the requirements of American law, which is more comprehensive than the Israeli bills.