The SEC Filed Civil False-Certification Charges Against Which U.S. Financial Institution?

The U.S. Securities and Exchange Commission (SEC) recently filed civil false-certification charges against U.S. financial institution Goldman Sachs for failing to properly certify that its financial statements complied with applicable accounting standards. Goldman Sachs had previously issued an inaccurate press release which stated that its financial statements complied with applicable accounting standards when, in fact, they did not.

The SEC’s charges allege that Goldman Sachs violated the Securities Act of 1933, as amended by Section 302 of the Sarbanes-Oxley Act of 2002. Section 302 requires that CEOs and CFOs certify their company’s financial statements and accompanying disclosures, as well as disclose any material changes or inaccurate statements. Furthermore, CEOs and CFOs must certify that they have made a reasonable inquiry into the accuracy of the financial statements and that they have not knowingly withheld information from the financial statements. Goldman Sachs failed to comply with these requirements and issued a false certification.

The SEC’s action is likely to send a message to other publicly-traded companies that under no circumstances should individual officers/directors of these entities be allowed to make false certifications to shareholders. Such instances of non-compliance pose a serious risk to shareholders and potentially threaten the integrity of the financial markets.

The SEC’s action indicates that they are willing to take a strong stance against false certifications, regardless of the company’s size or type. In this case, Goldman Sachs is a large financial institution and the enforcement action serves to reinforce the importance of accurate financial statements and disclosures. The SEC’s action also serves to deter other financial institutions from making false certifications as well.

The SEC’s action against Goldman Sachs is likely to have a ripple effect throughout the U.S. financial institutions. It sends a clear message that false certifications are not tolerated and that any violation of the Securities Act of 1933 and subsequent amendments will result in significant repercussions. Financial institutions should thus take care to ensure that their financial statements and accompanying disclosures comply with applicable accounting standards and the disclosure requirements of the Securities Act of 1933.