Sarbanes Oxley Section 906 Certification

[Guest hank]

We're preparing to file our 11-K for our 401(k) plan near the end of June. In-house securities counsel insists that we must include a Sarbanes-Oxley section 906 certification with the filing. Has anyone else been advised that the 906 certification must be included with Form 11-K? If so, who are you having sign the certification? Plan administrator (who signs the ERISA equivalent, the Form 5500)? CEO of the plan sponsor? CEO/CFO of the plan sponsor?

Oh, one more thing: SEC is tightlipped to this point. Any guidance or reasoning, however informal, that you might be able to offer would be much appreciated. Thanks in advance!

[mbozek]

Section 906 requires CEOs and CFOs of US publicly held co to file a certification of the accuracy of the financial statements of the company filed with the SEC. How is a 401(k) plan an issuer of securites?

[Kirk Maldonado]

Although I've never looked at this issue, I don't think it should necessary to file the certification. Although the plan is an issuer of securities, it is a different issuer than the employer sponsoring the plan. That would be like requiring that General Motors include a certification from IBM.

Remember that the 11-K is for the plan; not the employer.

[E as in ERISA]

Section 906 adds Section 1350, which provides in relevant part:

“(a) CERTIFICATION OF PERIODIC FINANCIAL REPORTS- Each periodic report containing financial statements filed by an issuer with the Securities Exchange Commission pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) shall be accompanied by a written statement by the chief executive officer and chief financial officer (or equivalent thereof) of the issuer.”

Aren’t 11-Ks filed pursuant to Section 15(d).

So even if the CEO of the company doesn't sign the certification, doesn't the "CEO- or CFO-equivalent" of the plan have to do so?

[E as in ERISA]

And under Section 2(a)(7) of Sarbanes Oxley an issuer is defined as follows:

"The term `issuer' means an issuer (as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)), the securities of which are registered under section 12 of that Act (15 U.S.C. 78l), or that is required to file reports under section 15(d) (15 U.S.C. 78o(d)), or that files or has filed a registration statement that has not yet become effective under the Securities Act of 1933 (15 U.S.C. 77a et seq.), and that it has not withdrawn."

[Kirk Maldonado]

Katherine:

Who would be the CEO or CEO-equivalent of a plan?

[E as in ERISA]

I don't know. I'm just agreeing with "hank" that this is a valid issue -- for which there doesn't appear to be any clear guidance.

[Kirk Maldonado]

Katherine:

I agree that there is an issue.

However, I don't think that the right policy decision is that certification is required here. That makes no sense, when you look at what was the impetus for the enactment of SOX.

Also, I can't imagine a participant making a good faith argument that he or she relied upon the 11-K. I've never heard of a participant even reading one, much less saying that he or she relied upon it in making an investment decision.

Furthermore, the 11-K reflects the assets of the plan, not the assets of the underlying investment vehicles. I believe that any lawsuit based upon a 11-K would be frivolous.

[E as in ERISA]

I don't disagree. (In fact, I think that there are lots of provisions in Sarbanes Oxley that are misguided or overreaching). But the point is that the law as written is not clear. If you put in the search term ' "sarbanes oxley" 906 "11-k" ' on the SEC web site, you will see that others (mostly the CPA firms) are requesting clarification from the SEC on this issue in the final rules.

[Guest hank]

Here's an update:

Outside counsel cold called SEC and was told a SOX 906 certification IS required with Form 11-K. SEC is reluctant to officially guide on ths issue since SOX 906 is under the jurisdiction of the Dept of Justice.

The plan is the issuer for 15d purposes, and the "securities" are the interests in the plan that are registered with the SEC on Form S-8. As for who should sign, we're going to have the plan's CEO (chairman of the administrative fiduciary committee) and the plan's COO (designated plan administrator, who also signs Form 5500) execute the certification) sign the SOX 906 certification.

I agree with Kirk - all of the policy arguments logically suggest that this is an unnecessary exercise. Recently, however, Senator Biden, claiming to be a principal author of Section 906, read into the Congressional Record remarks that state flatly that Congress intended to include Form 11-K among the periodic filings covered by SOX 906. Whether this hindsight "legislative history" will ever be given any weight by a court remains to be seen. However, when faced with the prospect of a criminal sanction for failing to certify, well....you figure it out!

If you are at all interested in how to do this, see the Amazon.com 11-K filing at this link:

http://www.sec.gov/Archives/edgar/data/101...v89422e11vk.htm

[E as in ERISA]

Note those certifying the 11-Ks: Remember that "you get what you pay for"....and you generally pay almost nothing for the 11-Ks. As a result, there is frequently very little time spent on them and they may even have numerous errors on their face. Start by making sure that the name of the plan, the name of the trustee, the description of the plan, the plan year are all correct...and that all references are internally consistent (you'd be surprised how often these are wrong!). And have someone who understands the requirements for benefit plan financial statements review them (or have someone trained to do so). There are special rules for plans that the auditors are completely unaware of (because they are generally the same persons who audit the company and don't know a thing about benefit plans) . E.g., a footnote disclosure of any "related party transactions" (both exempt and nonexempt) is required. But tell me if you see any footnote regarding transactions in employer stock in Enron stock (or Northern Trust funds) in their 11-K: http://www.sec.gov/Archives/edgar/data/102...018/ene11-k.txt (My guess is that the auditors did not perform the required review steps either).

[Guest corplawblogger]

The SEC today issued its final release telling us how to file 906 certificates. Unfortunately, for those of us looking for certainty, the SEC deferred the 11-K issue: "In light of these developments [i.e., the concerns related in the release], we are considering, in consultation with the Department of Justice, the application of Section 906 to current reports on Forms 6-K and 8-K and annual reports on Form 11-K and the possibility of taking additional action."

My latest post at Corp Law Blog discussing this is at http://www.corplawblog.com/archives/000058.html.

[Guest bjg]

The Wall Street Journal online reported on this issue today. You can read about it Benefitsblog.