September 9, 2016
9th Circuit Upholds No-Fault SOX Clawbacks
– John Jenkins
This Proskauer blog discusses the 9th Circuit’s recent decision in SEC v. Jensen – which upheld the SEC’s authority to clawback CEO & CFO incentive comp under Section 304 of Sarbanes-Oxley without demonstrating personal misconduct:
The U.S. Court of Appeals for the Ninth Circuit recently held that the Sarbanes-Oxley Act’s disgorgement provision – which requires disgorgement of certain CEO and CFO compensation when an issuer restates its financial statements “as a result of misconduct” – applies even if the CEO and CFO were not personally involved in the misconduct. Although several district courts had previously reached that same conclusion, but the 9th Circuit’s decision in Jensen appears to be the first appellate ruling on the issue.
The 9th Circuit also held that Rule 13a-14 provides the SEC with a right of action against officers who certify false or misleading financial statements. We’re posting memos in our “Clawbacks” Practice Area.