The Securities and Exchange Commission announced three new enforcement initiatives, including a task force aimed at rooting out potential fraud involving issuer disclosures and audit failures. See http://www.sec.gov/news/press/2013/2013-121.htm.
The SEC said its Financial Reporting and Audit Task Force will expand the Enforcement Division's efforts to identify securities law violations relating to the preparation of financial statements; issuer reporting and disclosures; and audit failures. The SEC also announced a Microcap Fraud Task Force, and a new Center for Risk and Quantitative Analytics. The SEC claims that financial fraud is frequently detected through issuer restatements. These restatements have declined in recent years through the quality controls instituted by the Sarbanes-Oxley Act of 2002.
The financial reporting task force will focus on identifying and exploring areas that may be susceptible to fraudulent financial reporting, reviewing financial statement restatements and revisions, analyzing industry performance trends, and using risk-based analytical tools such as the Accounting Quality Model to identify financial statement issues. The task force will include enforcement attorneys and accountants from across the country, and collaborate closely with the Division's Office of the Chief Accountant, the SEC Office of the Chief Accountant, the Division of Corporation Finance, and the Division of Economic and Risk Analysis.
The microcap task force will focus on fraud in the issuance, marketing, and trading of microcap securities. The task force will develop and implement strategies to detect and fight microcap fraud, especially by focusing on "gatekeepers," such as attorneys, auditors, and broker-dealers, and other significant participants. The Center for Risk and Quantitative Analytics will support and coordinate the division's risk identification and assessment, and data analytic activities. A key objective of the Center for Risk and Quantitative Analytics will be to assist Staff members, bringing them analytical techniques and computing capacity with special expertise in data mining while assisting in targeting investigations.
These changes indicate the SEC's efforts to "stay ahead of the curve."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
