Report on SEC Accounting and Finance Enforcement
If the public statements of the SEC Commissioners and staff are to be believed, brace yourself for the coming wave of financial reporting and accounting enforcement matters. The SEC has sent the message loud and clear in 2013: “The SEC is back and better than ever — and that certainly is the case when it comes to pursuing financial reporting and accounting fraud.”
That’s according to the first of a series of reports from Morrison & Foerster. Starting with calendar year 2013, we plan to track and analyze the SEC’s renewed enforcement efforts focusing on public company financial reporting and accounting, as well as the efforts put forth by the PCAOB. Public companies, officers and directors, audit firms, auditors, and securities practitioners alike can turn here for an insightful discussion of the key cases and trends from the year.
The SEC’s emphasis on financial reporting is not unique, of course; pursuing such matters has long been one of the Commission’s core focus areas. Yet in recent years — after the extensive activity in the early 2000s and the Sarbanes-Oxley Act, and a brief resurgence with stock option backdating — news about financial reporting and accounting matters took a back seat to cases concerning the Financial Crisis of 2008, insider trading, FCPA-related matters, and Ponzi schemes of all types. The numbers confirm this: The SEC filed 79 financial reporting cases in 2012, compared to 219 in 2007. And the agency opened 124 such investigations in 2012, compared to 304 in 2006 and 228 in 2007. Last year, though, the SEC proclaimed that this trend was about to end.
In this first edition, the firm discusses developments within the SEC and its renewed vigor in the financial reporting and accounting arena. Next, it discusses areas on which the SEC has said that it will focus its financial reporting and accounting enforcement efforts. It then analyzes the SEC’s cases in 2013, which may best be viewed as a baseline against which future SEC priorities and efforts will be compared. Thereafter, it explores specific themes that emerged from last year’s cases, as applicable to public companies and their officers and directors, as well as to audit firms and auditors. It then discusses the several cases last year that focused on Rule 102(e) bars. Finally, it closes with a review of developments at the PCAOB.