Earlier this month, the SEC announced settled charges against former Wells Fargo CEO and Chairman, John G. Stumpf, as well as charges against former head of Wells Fargo’s Community Bank, Carrie L. Tolstedt, alleging that they misled investors about the success of the Community Bank, Wells Fargo’s core business. (Wells had already agreed to pay $3 billion to settle charges from the SEC and the Department of Justice.) The SEC charged that they made misleading public statements about the company’s strategy and a key performance indicator, the “cross-sell metric,” and signed misleading certifications and sub-certifications as to the accuracy of these and other public disclosures. In the Order, Stumpf has agreed to settle the action against him for $2.5 million, but Tolstedt has not agreed to settle, and the SEC has filed a complaint against her in Federal District Court, seeking an officer and director bar, a monetary penalty and disgorgement. The Order and complaint highlight, once again, problems that can arise out of public disclosure of misleading key performance indicators. Moreover, the SEC’s allegations provide a cautionary tale about the responsibility of those signing certifications (and sub-certifications) regarding the accuracy of periodic reports to heed clear alarm bells and question sub-certifications where appropriate to do so.
Ninth Circuit addresses SOX 304 clawback requirements and liability for Rule 13a-14 false certifications
by Cydney Posner A new case from the 9th Circuit, SEC v. Jensen, is the first circuit court case to confirm the SEC’s position that the “clawback” provisions of SOX 304 provide for a disgorgement remedy against CEOs and CFOs when the issuer has restated its financial statements as a […]