The U.S. Court of Appeals for the Ninth Circuit Interprets Rule 13a-14 of the Securities Exchange Act and Section 304 of the Sarbanes-Oxley Act: The Ninth Circuit Holds That a CEO or CFO May Have Liability for a False Rule 13a-14 Certification, and SOX’s Disgorgement Provision Applies Irrespective of Whether a Restatement Is Caused by a CEO’s or CFO’s Personal MisconductSullivan & Cromwell LLP - September 8, 2016
On August 31, 2016, in SEC v. Jensen, 14-55221, slip op. (9th Cir. Aug. 31, 2016), the United States Court of Appeals for the Ninth Circuit reversed the district court’s rulings interpreting Rule 13a-14 of the Securities Exchange Act and Section 304 of the Sarbanes-Oxley Act, holding that Rule 13a-14 provides the Securities and Exchange Commission with a cause of action against Chief Executive and Chief Financial Officers who provide a false certification pursuant to Rule 13a-14—not merely against those who fail to make any certification at all—and, as a matter of first impression by an appellate court, that the disgorgement remedy authorized by Section 304 applies regardless of whether an accounting restatement is caused by the personal misconduct of an issuer’s CEO or CFO. In an opinion written by the Honorable Richard R. Clifton, the panel remanded the case for a jury trial. Judge Carlos T. Bea joined the panel’s opinion and also concurred separately.