The Sarbanes-Oxley Act, commonly known as SOX, is a U.S. federal law enacted in 2002. It was created to protect investors by improving the accuracy and reliability of corporate disclosures. This legislation was a response to major financial scandals, such as those involving Enron and WorldCom, which highlighted the need for stricter regulations in financial reporting. SOX establishes requirements for all publicly traded companies, including the necessity for internal controls and regular audits. It also imposes penalties for fraudulent financial activity and enhances the accountability of corporate executives, ensuring they certify the accuracy of financial statements.