SEC forms specialized unit to tackle accounting fraud
Partner and co-chair of Herrick's Securities Litigation and Enforcement Group, Arthur G. Jakoby, spoke with Thomson Reuters about the Securities and Exchange Commission's ("SEC") decision to establish a new specialized unit within its Division of Enforcement focused on accounting, auditing and financial reporting matters.
The article notes that "the Financial Reporting and Accounting Unit will include attorneys and accountants with specialized skills in financial reporting, accounting and auditing related to securities regulation."
"The SEC is recognizing a reality long understood by enforcement professionals: financial fraud rarely succeeds without gatekeeper failures," said Arthur. "Too often in accounting fraud and hedge fund Ponzi scheme cases, enforcement efforts focus exclusively on the principal wrongdoer while insufficient scrutiny is given to independent auditors and accounting firms, including the large global auditors, whose clean audited financial statements investors relied upon when making investment decisions."
"A specialized accounting and financial reporting unit should improve the SEC’s ability to pursue not only the architects of fraud schemes, but also the accounting and auditing misconduct that may have allowed those schemes to continue undetected," he added.