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SEC Rule 13(b)

Requires all issuers to keep books, records and accounts and have in place adequate internal accounting controls to ensure that the activities of the firm are subject to the general or specific authorization of management.

Rule Overview

Jurisdiction: United States

Regulator: SEC

Topic: Recordkeeping

Overview
Latest News
Further Reading

The rule requires firms to:

  • Make and keep books, records and accounts in reasonable detail, accurately and fairly to reflect transactions
  • Devise and maintain a system of internal accounting controls sufficient to provide reasonable assurance that:
    • transaction are executed with management’s general or specific authorizations
    • transactions are recorded as necessary to:
      • permit the preparation of financial statements
      • maintain accountability of assets
    • access to assets is permitted only with management’s general or specific authorization
    • recorded accountability for assets is compared with existing assets at reasonable intervals and action is taken with respect to any differences

The SEC has sometimes interpreted this provision to include non-accounting related controls.

This is consider the bedrock rule for books and records that underlies almost all of the FCPA cases the SEC brings against market participants.

SEC Rule 13(b)(5)
Prohibits the knowing circumvention, failure to implement a system of internal accounting controls or the knowing falsificataion of books, records or accounts
SEC Rule 13(b)(5)
Where the issuer does not have control over a domestic or foreign firm they are only required to proceed in good faith and use their influence to cause the firm in question to devise and maintin a system of internal accounting controls
SEC Rule 13(b)(7)
Defines reasonable assurances and detail as one that would satisfy prudent official in the conduct of their own affairs
Latest News More on SEA 1934 Rule 13(b) 

Further Reading

SEC Recordkeeping and Internal Control Provisions Go to https://www.sec.gov/spotlight/fcpa/fcpa-recordkeeping.pdf Are all "Internal Controls" Covered by Section 13(b) Go to https://www.thecorporatecounsel.net/blog/2023/11/enforcement-are-all-internal-controls-covered-by-section-13b2b.html