5 July 2002 The Securities and Exchange Commission (SEC) has ordered senior executives at 947 listed companies to swear under oath and in writing that the figures in their companies’ recent financial reports are true and correct. The companies concerned all had at least $1.2 billion (€1.23bn) in revenues last year.
The order from the SEC could result in harsh new penalties – including prison sentences – being imposed on CEOs and chief financial officers (CFOs) who personally endorse corporate financial statements that are later found to be wrong, fraudulent, or misleading.
Lawyers have said that the SEC’s order – aimed at making senior executives personally accountable – could expose CEOs and CFOs not only to civil charges of fraud, but also to criminal charges of perjury. The SEC itself cannot bring criminal charges but routinely refers cases to the US Department of Justice, which then prosecutes offenders.
By requiring senior business decision-makers to personally sign and certify the accuracy of corporate financial results, the US stock market watchdog hopes to help restore investor confidence — badly dented in the wake of recent scandals such as that at Enron and WorldCom.
The new order is widely expected to result in a raft of financial re-statements in the next few weeks, as CEOs and CFOs fall over themselves to comply.