SEC’s New Approach to Exposing Accounting Fraud

The Securities and Exchange Commission has recently begun a new push to expose more financial reporting and issuer disclosure violations in public corporations and more aggressively charge violators. Not only has the SEC initiated more actions in the past few years, but it is beginning to charge more individuals and charge for more minor violations than in the past.[1] The trend in prosecuting many more officers, directors, and tax professionals working for a corporation for not only individual wrongdoing, but for “gatekeeper” issues regarding fraud in financial reporting and disclosures, shows that the SEC is expanding its reach in tackling accounting fraud.[2]  Interestingly, it is also tending to initiate prosecution for more technical and specific violations in the financial accounting realm, not just fraud. Cases have included instances of less severe misconduct or penalties that the SEC previously had not pursued as aggressively.

Financial reporting and issuer disclosure appear to be the agency’s main focus in this push. The significant rise in the number of actions the SEC has initiated recently, even for minor violations, indicate that now more than ever, corporations must take care in their accounting and reporting procedures.

— By Julia Damron, Esq., Barnes Law

Julia Damron is an associate attorney with Barnes Law, licensed to practice law in California.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Viswanatha, Aruna, “Prosecutorial Bent Shows in SEC Accounting-Fraud Push, Ex-Official Says”, Feb. 25. 2016, http://blogs.wsj.com/law/2016/02/25/prosecutorial-bent-shows-in-sec-accounting-fraud-push-ex-official-says/?mod=WSJBlog.

[2] Woodcock, David, et al., “SEC Enforcement in Financial Reporting and Disclosures—2015 Update”, Feb. 2016, http://www.jonesday.com/sec-enforcement-in-financial-reporting-and-disclosures2015-update-02-23-2016/.