February 11, 2021
Clawbacks: SEC Gets a SOX 304 Settlement
– Liz Dunshee
Last week, the SEC issued this order against a former CEO & CFO, which relied on Sarbanes-Oxley Section 304 to require the former execs to reimburse their company for incentive compensation. The SEC determined that they had made false & misleading statements that caused revenue to be improperly recognized, resulting in a restatement.
As this Cooley blog explains (and as we’ve detailed on TheCorporateCounsel.net), restatements are more rare these days than they used to be. Maybe that’s part of the reason that clawbacks under SOX 304 are also rare. The SEC made a point in its order that misconduct by the CEO & CFO themselves isn’t required to trigger that provision, and this order shows that the Commission is still willing to pursue recovery when the circumstances are right.