SEC wants auditors to be tougher on B-Ds

Stronger audit reports needed to keep tabs on firms with custody

Dec 12, 2010 @ 12:01 am

By Bloomberg News

The Securities and Exchange Commission wants to enlist the accounting industry to help restore investors' trust in financial markets by boosting oversight of broker-dealers.

The agency is looking to “leverage the profession” by updating a 30-year-old broker-dealer custody rule that requires auditors of firms that control client assets to give assurance that reported numbers are accurate, SEC Chairman Mary Schapiro said last week in a speech at an American Institute of Certified Public Accountants conference in Washington.

As part of the plan, Ms. Schapiro said, the commission is laying the groundwork for implementing new powers spelled out in the Dodd-Frank Act that call for the Public Company Accounting Oversight Board to inspect auditors of all broker-dealers.

The SEC is expanding scrutiny of broker-dealers after investors lost billions of dollars in a Ponzi scheme conducted by Bernard Madoff, whose investment advisory firm also acted as a custodian. The agency last December voted to require that money managers who hold customer cash and securities be subjected to surprise inspections.

“We continue to demonstrate our willingness to prosecute those who betray the trust of the public markets,” Ms. Schapiro said. “But bringing actions after the fact is no substitute for full and honest disclosure at the outset. Enforcement actions are cold comfort for investors who lost their savings after relying on misrepresentations or half-truths.”

Mr. Madoff, 72, who was arrested in December 2008 after confessing to the Ponzi scheme, is serving a 150-year prison sentence.

The accounting industry will play a crucial role in helping investors regain confidence in the wake of his scheme and the 2008 financial crisis, said Ms. Schapiro, who urged auditors to push for accuracy and clarity in reporting.

“Our markets depend on confident investors — and their confidence rests in large part in your hands,” she told the attendees at the conference. “The SEC and other agencies can increase the confidence investors bring to our financial markets, but our efforts will succeed only if those investors believe the numbers that you write on the bottom line.”

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

The need for easier investment options.

Rob Barnett of Wilmington Trust makes the case for simpler investment choices for plan participants and sponsors.

Latest news & opinion

Pope Francis wants financial advisers to work like fiduciaries

Vatican bulletin admonishes advisers who act against the best interests of their clients.

Wells Fargo sees slowdown in advisers exiting this year

The 2016 banking scandal and public relations fiasco had alienated some of the firm's advisers.

States trying to save DOL fiduciary rule appeal rejection of effort to intervene

California, New York, Oregon ask for rehearing by full 5th Circuit Court of Appeals.

Employees at best places to work focus on the person — and the fun

Employees at best places to work firms focus on the person and fun.

Waddell & Reed sees flurry of senior staff departures

Firm also experiences an almost 30% decline in number of brokers and advisers.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print