While the SEC’s expansive view of the internal accounting controls provisions to reach clearly non-accounting conduct has so far centered on stock buybacks, the SEC noted in a footnote in the Charter order that it had always interpreted the provisions to apply to “corporate accountability” more broadly. Companies should be aware that the future enforcement approach might not be limited to buybacks. Any scenario in which a company engages in transactions with corporate assets in a manner that does not fully comply with a particular board authorization could come under SEC scrutiny for potentially deficient internal accounting controls, especially if there is a linkage to conduct that a majority of SEC commissioners believes falls short of good corporate practice.
‘Enforcement 40’ for 2020
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