SEC Continues Focus on Reporting Cases, Director Says

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April 29 — Financial reporting and audit cases will continue to be a major focus of Securities and Exchange Commission enforcement efforts, Enforcement Director Andrew Ceresney said April 29.

The number of such cases has more than doubled in the last two years, from 53 to 114, Ceresney said in New York on a Practising Law Institute panel.

More specifically, the SEC expects to bring cases in the coming months against accounting professionals that don't perform adequate independent audits, he said. The cases would be similar to recent multi-million dollar cases against BDO USA LLP and Grant Thornton LLC The cases are part of the agency's focus on gatekeepers, including outside auditors, Ceresney said.

Meanwhile, the SEC’s Division of Corporation Finance will increasingly challenge corporate disclosures that deviate from generally accepted accounting principles, Division chief accountant Mark Kronforst said April 28 (see related story).

More Negligent Accounting Assertions

The SEC also is pressing to claw back compensation from executives of firms implicated in financial reporting cases, even if the individuals haven't been charged with fraud, Cerseney said. The commission also expects to name more individuals in accounting enforcement actions, he said. The authority to allege negligence in addition to recklessness “gives us the ability to stretch widely in the individual realm,” he said.

A recent settlement with oil company Magnum Hunter Resources Corp. set an important precedent in the internal controls arena, Ceresney said. The firm and four individuals in March agreed to pay $290,000 in fines over alleged internal-control deficiencies, even though the company hadn't posted incorrect accounting numbers and wasn't accused of fraud . The case sends an important message that there can be an enforcement action even if a firm hasn't made a misstatement, Ceresney said. “It's forward-looking—what your likely result is in the future,” he said.

In addition, the agency soon will be bringing actions against municipal securities issuers as part of its Municipalities Continuing Disclosure Cooperation (MCDC) initiative, Ceresney said. The program, announced in March 2014, has focused on deficient disclosure practices involving municipal securities . The SEC already has sent settlement offers to certain issuers, an attorney told Bloomberg BNA in February .

To contact the reporter on this story: Richard Hill in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

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