SEC Accounting Fraud Unit Puts ‘Back-to-Basics’ Enforcement Into Action, Lawyers Say

Partner and co-chair of Herrick's Securities Litigation and Enforcement Group, Arthur G. Jakoby, was quoted in The National Law Journal discussing the U.S. Securities and Exchange Commission ("SEC") prioritizing traditional fraud cases with the creation of a Financial Reporting and Accounting Unit. 

The article notes that the SEC chair "has repeatedly stated his intention to return the commission to enforcing 'bread and butter' securities law cases including accounting and reporting fraud, as well as insider trading, rather than technical or procedural violations."

Arthur said the new unit should improve the agency’s ability to pursue not only the architects of fraud schemes, but also the accountants and auditors that allow those schemes to continue. He said the SEC has been reluctant in recent years to pursue cases against financial gatekeepers, like large accounting or auditing firms.

“I believe there's a real need for” the unit, said Arthur. But, he added, “I don't know if I’m optimistic. They’ve had an accounting unit before but they were highly ineffective and they went after small accounting firms, not large accounting firms.”

Read the full article in The National Law Journal here. Access may require a subscription.