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Sarbox Clawback Ruling Could Keep Pay in Some CFOs' Pockets A federal judge rules that a company with errors in its financials must restate if the CFO is to lose compensation.

Sarah Johnson, CFO.com | US
December 24, 2008

The letter and spirit of Section 304: On a plain reading of Section 304, the disgorgement requirements apply only when the following happen:

a) there is a material non compliance by the issuer of a financial reporting requirement under the securities laws;
b) the material non compliance is as a result of misconduct;
c) which results in a need for an accounting restatement

Besides, under Section 304b, the SEC has been conferred the authority to exempt any person from the above as it deems fit.

In Neer vs. Pelino, the District Court held that Section 304 does not confer on the shareholders an implied right to bring about derivative actions against the CEO/CFO. It recognized the impugned Section more as a punitive measure to be enforced by the SEC than as a means to bring about retribution to the affected parties.; Posted by Chandrasekar Venkataraman | Dec 25, 2008 12:07 PM ET