Compliance » Not Culpable, But They Profited, So CFOs Must Disgorge

Not Culpable, But They Profited, So CFOs Must Disgorge


February 23, 2015

Earlier this month the SEC announced a settlement with two former CFOs of Saba Software, a Silicon Valley company. The two men will be required to repay the company more than $500,000 in bonuses and profits from stock sales earned following Saba’s false SEC filings. With regard to that matter, the company had agreed to a $1.75 million fine in September of last year. “Notably,” says a post from Drinker Biddle & Reath,” the SEC did not allege that either former officer violated the federal securities laws in any fashion, nor was there evidence of either officer’s knowledge of, or complicity in, the underlying conduct that prompted the company to settle accounting fraud charges.” Neither of those conditions had to be met to trigger this kind of clawback, per Sarbanes-Oxley Section 304(a), which went into effect in 2002. It only needed to be shown that they profited as a result of the false filing, either by way of incentive-based or equity based compensation, or by personal stock sales.

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