On November 13, 2012, the US District Court for the Western District of Texas held in SEC v. Michael A. Baker and Michael T. Gluk that the SEC may clawback bonus compensation to the CEO and CFO (Defendants) under Section 304 of the Sarbanes-Oxley Act of 2002 (SOX), even when the Defendants were not involved in or aware of the fraud that later required the company's financial statements to be restated. The SEC did not claim that the Defendants had committed or were involved in any conscious wrongdoing, but rather, that the Defendants had to surrender their bonuses simply because they had been the CEO and CFO at the time of the fraud and certified the company's filings. The Defendants filed a motion to dismiss the SEC's complaint, claiming, among other issues, that:

Section 304 permits the SEC to sue the CEO or CFO of a company if the company had to restate its financial statements due to a violation of securities laws. It also requires the CEO or CFO to reimburse the company for any bonus or similar compensation received during the 12-month period following the false financial report.

While most previous instances where the SEC sought a clawback of bonuses under Section 304 usually involved allegations of wrongdoing against the CEO or CFO, the court held that Section 304 does not require any personal wrongdoing. In particular, the court noted that the CEO and CFO are required by SOX to monitor the company's internal controls to guard against serious misconduct or noncompliance, and they signed certifications representing that they had done so. As a result, they should bear the risk of any misconduct.

The court also rejected the Defendants' constitutional challenges to Section 304, finding, among other things, that the plain text of the statute was not vague. In its constitutional review, the court noted the rational basis for Section 304, namely that it creates a personal incentive for the CEO and CFO to take their reporting and certification duties seriously.