The SEC brought civil charges against six accountants for using confidential information to help an accounting company pass audit inspections.

The charged individuals include former officials with the Public Company Accounting Oversight Board ("PCAOB") and KPMG LLP. According to the SEC Order, a former PCAOB official, Brian Sweet, accessed and retained confidential information before leaving PCAOB to take a position at KPMG. Mr. Sweet allegedly took information from PCAOB about KPMG clients. The information at issue included the areas of focus of inspection against KPMG clients and the quantitative and qualitative criteria used in determining which clients to inspect. Further, after joining KPMG, Mr. Sweet allegedly continued to receive confidential information from a PCAOB colleague, Cynthia Holder. Ms. Holder also eventually left the PCAOB to join KPMG. A third former PCAOB official, Jeffrey Wada, was charged with leaking information to Mr. Holder while attempting to gain employment at KPMG.

In addition to the three former PCAOB officials, the SEC alleged that three former KPMG officials, David Middendorf, Thomas Whittle and David Britt, encouraged Mr. Sweet and Ms. Holder to divulge the information, and worked with them to utilize it to produce favorable audit results.

Mr. Sweet agreed to settle the civil charges with a cease-and-desist order prohibiting him from violating PCAOB ethics laws and banning him from appearing before the SEC as an accountant. The other defendants will face a public hearing before an Administrative Law Judge.

SEC Chair Jay Clayton called the allegations "disturbing," and said that independent audits are crucial to ensure that investors are confident in the accuracy of companies' financial statements. He shared that he has directed PCAOB Chair William Duhnke to review the PCAOB's previous assessment following the information breach, and to take further action if necessary.

In a parallel criminal action, the U.S. Attorney's Office for the Southern District of New York also announced criminal charges against the accountants.

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