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12.9 Payments to Directors and Officers

Sarbanes-Oxley and subsequent SEC directives stipulate that

  • no public company may make a personal loan to a director or officer, and existing loans may not be materially modified or renewed;
  • the CEO and CFO of a public company that restates its financial statements as a result of misconduct will have to forfeit any bonuses, incentives, equity-based compensation, and profits on sales of company stock realized during the 12-month period following the first public issuance of the financial document or report containing the inaccurate financial statements;
  • the SEC has the authority to freeze any extraordinary payments by the company to any of its directors or officers while an investigation is ongoing;
  • the SEC can bar a person who has violated section 17(a) of the Securities Act of 1933 or section 10(b) of the Exchange Act from serving as a public company director or officer;
  • directors, officers, and 10% of stockholders of public companies are required to report changes in beneficial ownership within 2 business days after the relevant transaction;
  • directors and executive officers are prohibited from buying or selling equity securities during a blackout period;
  • nonmanagement directors are required to meet in regularly scheduled executive sessions without management present.