SEC Proposes Rules Requiring All CEO/CFO Certifications to Be Filed As Exhibits

Since the enactment of the Sarbanes-Oxley Act of 2002 on July 30, 2002, public companies have been required to provide two separate CEO/CFO certifications in connection with their periodic SEC reports, one pursuant to Section 302 and the other pursuant to Section 906 of the Sarbanes-Oxley Act. The differences between the two certification requirements and, in particular, the method for delivery, have resulted in significant confusion for public companies. Recently, the SEC has proposed rules that would specifically require both of these certifications to be delivered as exhibits to SEC reports. The proposed rules are subject to a 45-day public comment period and may be found at www.sec.gov/rules/proposed/33-8212.htm.

In the proposing release, the SEC emphasized that providing the CEO/CFO certifications as exhibits will allow investors, the SEC and the Department of Justice (which has primary jurisdiction over the Section 906 certifications) to more easily confirm that the certifications have been made. The SEC did not propose any other changes to its existing rules governing Section 302 certifications, which were adopted in August 2002 and discussed in our Public Company Advisory entitled "SEC Adopts Rules on CEO/CFO Certifications and Disclosure Controls and Procedures,"which is available at http://www.goodwinprocter.com/publication s/pc_sarox_CEOCFOrules_9_02.pdf. The SEC has not previously adopted any rules governing the Section 906 certifications, the requirements of which are set forth solely in the Sarbanes-Oxley Act itself. If the proposed rules are adopted, the failure to include the Section 906 certification as an exhibit will cause the report to be incomplete, and in violation of Section 13(a) of the Securities Exchange Act of 1934.

The proposed rules maintain a key difference between the two certifications. As a technical matter, the Section 302 certifications are considered "filed" as part of the SEC report to which they are attached, whereas Section 906 certifications will be considered to be "furnished," rather than "filed." As a result, the Section 906 certifications are not subject to liability under Section 18 of the Securities Exchange Act or automatically incorporated by reference into previously filed registration statements though the certifications remain subject to potential liability under Rule 10b-5.

Prior to the adoption of the proposed rules, companies should continue to file the Section 302 certifications in accordance with the existing SEC rules – in the body of the report immediately after the signature page.

With respect to the Section 906 certifications, the SEC acknowledged that, to date, companies have employed a variety of methods for delivery, including inserting the certification into the body of the report, submitting it as an exhibit, furnishing it on Item 9 of Form 8-K and providing it in concurrent EDGAR correspondence. In its release, the SEC encouraged companies to voluntarily comply with its proposals and begin submitting the Section 906 certification as an exhibit. However, we believe that, until the final rules are effective, companies should continue to furnish their Section 906 certifications in accordance with their current practice.

The SEC stated that it will treat the Section 906 certifications from any company that included them as an exhibit in voluntary compliance with the proposed rules as being "furnished" (and not "filed"), despite the rules not yet being in effect. Also, the SEC suggested that companies include the following legend after the text of each certification "A signed original of this written statement required by Section 906 has been provided to [name of issuer] and will be retained by [name of issuer] and furnished to the Securities and Exchange Commission or its staff upon request."