Securities Law Statutory Provisions
The legal pillars under the Securities Act of 1933, Securities Exchange Act of 1934, and Sarbanes-Oxley Act governing accounting fraud, restatements, and auditor discipline.
- Securities enforcement actions rely on distinct statutory provisions that divide strict reporting non-compliance from intentional fraud.
- Section 13(a) and Section 13(b)(2) require no proof of fraudulent scienter, establishing liability solely upon material financial inaccuracy.
- Section 10(b) and Rule 10b-5 require establishing severe recklessness or conscious intent to defraud in connection with securities transactions.
Exchange Act § 10(b) / Rule 10b-5
Makes it unlawful to employ any device, scheme, or artifice to defraud, or to make any untrue statement of a material fact or omit to state a material fact necessary to make statements not misleading in connection with the purchase or sale of securities.
Exchange Act § 13(a)
Requires every issuer of a registered security to file annual reports (Form 10-K) and quarterly reports (Form 10-Q) that contain complete, accurate, and non-misleading financial statements.
Exchange Act § 13(b)(2)(A)
Requires issuers to make and keep books, records, and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer.
Exchange Act § 13(b)(2)(B)
Mandates that public issuers devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are executed in accordance with management authorization and recorded properly.
Exchange Act § 13(b)(5)
Prohibits any person from knowingly circumventing or knowingly failing to implement a system of internal accounting controls or knowingly falsifying any book, record, or account.
Securities Act § 17(a)
Prohibits fraud, untrue statements of material fact, omissions, or deceptive practices in the offer or sale of securities, applying to IPOs, secondary offerings, and private placements.
Sarbanes-Oxley § 302
Requires principal executive and financial officers (CEO and CFO) to personally certify under oath that periodic reports contain no material misstatements and that internal disclosure controls have been reviewed.
Sarbanes-Oxley § 304
Requires CEOs and CFOs of issuers that restate financials due to material noncompliance as a result of misconduct to reimburse the issuer for bonuses, incentive pay, and equity profits received during the 12-month period following the filing.
SEC Rule of Practice 102(e)
Authorizes the Commission to censure or deny, temporarily or permanently, the privilege of appearing or practicing before the Commission to accountants who engage in improper professional conduct or lack character and integrity.