Recently, the Securities and Exchange Commission announced the formation of a new unit within the Division of Enforcement, which will focus on accounting and financial reporting related issues. This group, the Financial Reporting and Accounting Unit, replaces the SOX Group. The Unit will be staffed by accountants and attorneys in order to be able to bring to bear specialized expertise to investigations relating to accounting fraud. The Unit also is expected to consider misconduct by accountants and auditors. The Unit will coordinate with other offices within the SEC, including, among others, the Office of the Chief Accountant, the Division of Corporation Finance, and the Division of Economic and Risk Analysis. The creation of this Unit and the focus on financial reporting investigations are consistent with SEC Chair Atkins’ announced priorities of a “back-to-basics” enforcement approach. This has meant moving away from the prior administration’s focus on recordkeeping cases and on cases that often involved ESG-related disclosure shortcomings to cases that involve microcap fraud, retail investor protection issues, and internal control violations. See the release.
