CEO and CFO Charged with SOX Certification Misreps
The SEC charged the CEO and CFO of a public company for making misrepresentations in Sarbanes-Oxley internal control certifications. According to the SEC, notwithstanding contrary statements in the SOX certifications signed by both respondents, the CEO did not actually participate in management’s assessment of internal controls. Additionally, the SEC alleges that both parties knew of certain internal control failures and revenue recognition issues and lied to auditors. The SEC charges violations of the anti-fraud rules as well as various reporting requirements.
OUR TAKE: SEC mandated certifications and reports, including SOX and compliance certifications, can have serious consequences if it is later determined that the signers made misrepresentations. The SEC can link those misstatements to securities fraud charges.