(FORTUNE Magazine) – From Washington... Uncle Sam wants to help you! That's the main message of the corporate-fraud legislation that breezed through Congress in July (see "D.C. Gets It Almost Right" in First). With accounting scandals in the headlines, Washington made finding new ways to protect average investors its No. 1 priority. "This is the most significant pro-investor legislation we've seen in many, many years," says Ann Yerger, spokeswoman for the Council of Institutional Investors. The bill aims to shore up the biggest hole in investor confidence these days--doubts that auditors are honest and independent--by creating an oversight board to police accounting firms. It also prohibits accountants from providing consulting services to the companies they audit. CEOs and CFOs, in addition, must now swear to their companies' financial results. If they're caught making big mistakes, they face steeper penalties and jail time, thanks to a widened set of antifraud statutes.

...to investors But will the new measures really work? Most experts think they will--that is, if the five members of the new oversight board are chosen with care by the Securities and Exchange Commission. "If it appoints people who are committed to reform and independent of the industry, we should see a dramatic improvement," says Barbara Roper of the Consumer Federation of America. In any case, shareholders should get more information faster: Material changes in a company's financial condition must be disclosed immediately and in "plain English." They also have a better chance of getting restitution in a case of fraud. The SEC must put into a new fund all fines and disgorgements it recovers from executives who break the law. Finally, shareholder lawsuits will be easier to file. The law extends the time for filing suits to two years (from one year currently) after the date a fraud is discovered and to five years (from three years) after the fraud occurs. Whether a deluge of shareholder lawsuits is ultimately a good thing--well that's another question. --Jeffrey H. Birnbaum