NEW YORK (CNN/Money) -
In the midst of accounting scandals at WorldCom and Enron, the Securities and Exchange Commission implemented an order last week requiring executives at major corporations to sign-off on financial documents, which could mean civil penalties or jail time for those who vouch for misleading reports, according to a published report Friday.
The order requires chief executives and chief financial officers at companies with revenue more than $1.2 billion last year to sign their company's next filing with the SEC, which will be Aug. 14 for most companies, according to the Wall Street Journal.
The order includes some documents already on file with the SEC, which could lead to a wave of financial restatements as companies get their books in order before executives sign them, the paper speculated.
Executives at the 947 companies covered by the new order will have to swear in writing that the financial document does not contain untrue statements or omit material facts "to the best of their knowledge," the Journal reported.
If a company's books turn out to be misleading, the SEC could turn the case over to the Justice Department for prosecution. A criminal case based on lying in a sworn statement is easier to prove than a complicated accounting fraud case, according to the report.
"I have to assume this is a first step, and that the follow-up could be cherry-picking a few CEOs and bringing them before a grand jury on perjury charges," Theodore Sonde, a lawyer in the Washington office of Crowell & Moring and a former SEC enforcement official, told the paper. "How many CFOs are going to have sleepless nights between now and mid-August?"