SECURITIES EXCHANGE ACT OF 1934
Exchange Act § 13(b)(2)(A)
Books and Records Accuracy Standard
KEY FACTS
- Statutory provision: Exchange Act § 13(b)(2)(A) under the Securities Exchange Act of 1934.
- Scienter standard: No Scienter Required Against Issuers.
- Standard statutory remedies: Civil penalties, corporate monitors, mandatory accounting remedial undertakings.
Statutory Scope & Legal Description
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.
Legal Elements Required for Enforcement Liability
- 1 Failure to record transactions in accordance with GAAP/IFRS
- 2 Off-balance-sheet concealment of assets, liabilities, or expenses
- 3 Falsification of ledgers, journal entries, or supporting invoices
Legal Standards Profile
Scienter Burden: No Scienter Required Against Issuers
Statutory Remedies: Civil penalties, corporate monitors, mandatory accounting remedial undertakings.
Jurisdiction: United States Federal Law
Enforcement Precedents Charging Exchange Act § 13(b)(2)(A)
10 Selected Precedents| Case | Status | Overstatement | Penalties |
|---|---|---|---|
| Luckin Coffee: $300M Fabricated App Sales and Circular Cash Scheme Fabricated store coffee orders through fake corporate customer vouchers and circular mobile app payments. | Settled, neither admitted nor denied | $311.0M | $180.0M |
| Parmalat: $4.9B Forged Bank of America Deposit Certificate Forged letters on Bank of America stationery confirming €3.95B in nonexistent offshore Cayman escrow accounts. | Adjudicated | $4.9B | $0 |
| Toshiba Corporation: $1.9B 'Challenge' Pressure Profit Inflation CEOs mandated impossible profit targets ('Challenges'), pushing divisions into postponing losses and underestimating construction costs. | Adjudicated | $1.9B | $62.0M |
| Sino-Forest Corporation: Fictitious Timberland Holdings and Valuation Fraud Short seller Muddy Waters revealed company did not own the millions of hectares of Chinese forestry assets claimed. | Adjudicated | $3.0B | $0 |
| Americanas S.A.: R$20B Off-Balance-Sheet Supplier Risk Financing Concealed 20 billion reais in 'risco sacado' (drawn risk) bank debt used to pay suppliers. | Alleged | $4.1B | $0 |
| Patisserie Valerie: £94M Forged Invoices and Secret Overdrafts Financial controller forged thousands of supplier invoices and opened secret £10M bank overdrafts hidden from board. | Adjudicated | $120.0M | $3.1M |
| Computer Associates: $2.2B '35-Day Month' Revenue Backdating Routinely kept corporate accounting books open past quarter ends to backdate hundreds of millions in software license sales. | Adjudicated | $2.2B | $225.0M |
| Nortel Networks: Cookie-Jar Reserve Manipulation for Executive Bonuses Manufactured redundant accruals in profitable periods, then bled $900M into earnings to trigger return-to-profitability bonuses. | Settled, neither admitted nor denied | $3.2B | $35.0M |
| Tyco International: $600M Executive Looting and Reserve Accounting CEO Dennis Kozlowski and CFO took hundreds of millions in undisclosed unauthorized bonuses and loan forgiveness. | Adjudicated | $600.0M | $50.0M |
| Adelphia Communications: $2.3B Off-Balance-Sheet Family Co-Borrowing Concealed $2.3B in bank loans guaranteed for the founder's family entities to buy company stock and personal timberlands. | Adjudicated | $2.3B | $715.0M |