What Are the Section 906 Certification Requirements?
Understand the Sarbanes-Oxley Section 906 certification, a provision establishing personal executive accountability for the integrity of financial reports.
The Sarbanes-Oxley Act of 2002 (SOX) introduced significant reforms to corporate financial reporting, born from a series of high-profile accounting scandals. A key component of this legislation is Section 906, which aims to bolster corporate responsibility by requiring senior executives to personally vouch for the accuracy and completeness of their company’s financial reports. The purpose of the Section 906 certification is to ensure that the highest levels of a company’s management are directly accountable for the information provided to the public and regulators. By mandating this personal attestation, the regulation seeks to improve the integrity of corporate disclosures filed with the Securities and Exchange Commission (SEC).
Covered Reports and Required Signatories
The requirement for a Section 906 certification applies specifically to periodic reports that a company files with the SEC and that contain financial statements. This includes the most common filings that investors and analysts rely on, such as the comprehensive annual report on Form 10-K and the quarterly updates on Form 10-Q. Any similar periodic filing that includes a full set of financial statements is also subject to this rule.
This mandate extends to a broad range of companies, encompassing not only domestic U.S. corporations but also foreign private issuers that are registered with the SEC and file periodic reports. The certification must be provided by the company’s principal executive officer or officers and the principal financial officer or officers. This means the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), or individuals performing equivalent functions, are personally required to sign the statement.
Content of the Certification Statement
The Section 906 certification statement contains two fundamental attestations that signing officers must make. The first is a declaration that the periodic report fully complies with the requirements of section 13 or 15 of the Securities Exchange Act of 1934. This means the report adheres to all the SEC’s rules for form, content, and filing deadlines.
The second attestation is that the information contained in the report “fairly presents, in all material respects, the financial condition and results of operations of the issuer.” This goes beyond simple adherence to accounting rules like Generally Accepted Accounting Principles (GAAP). It speaks to the overall truthfulness of the financial picture being presented, ensuring that the report does not contain misleading statements or omit material facts that would be important to an investor’s understanding.
This certification is distinct from a similar requirement under Section 302 of SOX, which involves a more detailed set of assertions about internal controls over financial reporting. The Section 906 statement is broader and carries with it the weight of criminal, rather than civil, liability.
Penalties for Non-Compliance
The consequences for submitting a false Section 906 certification are enforced as criminal penalties by the U.S. Department of Justice. The statute establishes a two-tiered system of punishment based on the executive’s state of mind at the time of the certification.
In the first tier, an officer who certifies a report knowing that it does not meet all the requirements faces significant penalties. This includes a fine of up to $1 million, a prison sentence of up to 10 years, or both. This applies when an executive is aware that the report is non-compliant but proceeds with the certification anyway.
A more severe set of penalties applies to an officer who willfully certifies a statement knowing it is non-compliant. A willful violation implies a more deliberate and intentional act of deceit. For such an offense, the penalties increase substantially to a fine of up to $5 million, a prison sentence of up to 20 years, or both.
Submission of the Certification
The signed Section 906 certification must accompany the periodic report it relates to, such as the Form 10-K or 10-Q. Under SEC regulations, the Section 906 certification is typically submitted as an exhibit to the periodic report. Specifically, it is designated as Exhibit 32 in the filing, which ensures that the certification is permanently associated with the financial report and is readily accessible to the public through the SEC’s EDGAR database.
An important legal distinction exists in how the certification is treated. The Section 906 certification is considered “furnished” to the SEC, not “filed.” This distinction has implications for legal liability under the Securities Exchange Act of 1934. Items that are “filed” can create a basis for liability under Section 18 of the Act, which allows investors to sue for damages caused by false statements. By designating the certification as “furnished,” it is not automatically subject to this specific liability provision, though it remains subject to the criminal penalties outlined directly in Section 906.