What does Section 406 of the Sarbanes-Oxley Act require?

Section 406 of the Sarbanes-Oxley Act specifically mandates that public companies must disclose whether they have adopted a code of ethics for their senior financial officers, which include the CEO, CFO, and other senior financial staff. This requirement is crucial because it aims to promote ethical behavior and transparency among individuals in key financial positions, who have a significant influence on a company's financial reporting and integrity.

The focus on senior financial officers is particularly important due to their role in ensuring the accuracy of financial statements. By having a code of ethics in place for these individuals, it helps in establishing a standard of conduct that guides them in their decision-making and reinforces the commitment to ethical practices within the organization. This can foster trust among investors and the public, contributing to the overall goal of the Sarbanes-Oxley Act, which is to enhance corporate governance and accountability following financial scandals.