SEC Adopts Rules Implementing Sarbanes-Oxley Act Certification of Periodic Reports

Date: January 30, 2003

On August 27, 2002, the Securities and Exchange Commission (“SEC”) published rules implementing provisions of the Sarbanes-Oxley Act (the “Sarbanes-Oxley Act”) regarding Chief Executive Officer and Chief Financial Officer certification of disclosure in company’s quarterly and annual reports filed or submitted under Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (“Exchange Act”). The SEC’s press release can be found at The new final rule is summarized below.

CEO/CFO Certifications The SEC published a final rule with respect to CEO/CFO certifications. The rule can be found at The rules will apply to reports filed after August 29, 2002. New Exchange Act Rules 13a-14 and 15d-14 will require an issuer's principal executive and financial officers each to certify, with respect to the issuer's quarterly and annual reports filed or submitted under Section 13(a) or 15(d) of the Exchange Act of 1934, that:

  • he or she has reviewed the report and that:
    • based on his or her knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading;
    • based on his or her knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition and results of operations of the issuer as of, and for, the periods presented in the report;
  • he or she and the other certifying officers:
    • are responsible for establishing and maintaining "disclosure controls and procedures" (a newly defined term reflecting the concept of controls and procedures related to disclosure) for the issuer;
    • have designed such disclosure controls and procedures to ensure that material information is made known to them, particularly during the period in which the periodic report is being prepared;
    • have evaluated the effectiveness of the issuer's disclosure controls and procedures within 90 days of the date of the report; and
    • have presented in the report their conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation;
  • he or she and the other certifying officers have disclosed to the issuer's auditors and to the audit committee of the board of directors (or persons fulfilling the equivalent function):
    • all significant deficiencies in the design or operation of internal controls (a pre-existing term relating to internal controls regarding financial reporting) which could adversely affect the issuer's ability to record, process, summarize and report financial data and have identified for the issuer's auditors any material weaknesses in internal controls;
    • any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal controls; and
    • he or she and the other certifying officers have indicated in the report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

The new rules do not address Section 906 of the Sarbanes-Oxley Act and, although both the SEC and the Department of Justice are examining the interplay between Sections 302 and 906, the SEC is not offering any public guidance on complying with the Section 906 certification requirements. The new rules will apply to the principal executive and financial officers of any issuer that files quarterly and annual reports with the SEC under either Section 13(a) or 15(d) of the Exchange Act, including foreign private issuers and small business issuers. The certifications will be required to be filed immediately after the signature section of the quarterly and annual reports. New Exchange Act Rules 13a-15 and 15d-15 will require an issuer to establish and maintain an overall system of disclosure controls and procedures that is adequate to meet its Exchange Act reporting obligations. These rules are intended to complement existing requirements for reporting companies to establish and maintain systems of internal controls with respect to their financial reporting obligations.

For more information on this client Alert, please contact Frank S. Jones, Jr. (410) 347-8707 (email: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice. Copyright © 2002 Whiteford, Taylor & Preston L.L.P.