Andrew Ceresney, the Securities and Exchange Commission’s co-enforcement director, in an address Sept. 19, 2013, declared “[t]he importance of pursuing financial fraud cannot be overstated” and “comprehensive, accurate and reliable financial reporting is the bedrock upon which our markets are based because false financial information saps investor confidence and erodes the integrity of the markets.” Material misstatements and omissions in financial reporting, however, are not exclusively caused by fraud. The accounting profession, like any other profession serving in the capital markets, must be held to the highest professional standards and therefore focus has to be given to serious professional malpractice in the regulatory context. This should be the case, even where the professional lacks bad intent.
A review of the SEC’s recent rule 102(e) proceedings should demonstrate whether the commission is proceeding against accountants not merely for fraud but serious professional malpractice and thereby strengthening investor protection. “Comprehensive, accurate, and reliable financial reporting” as one of the bedrocks of our markets will only be established and maintained when professional standards of competency are emphasized and enforced to the same extent as ethics.
SEC Rule 102(e)
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