640 B-Ds to pay fees for auditor inspections

640 B-Ds to pay fees for auditor inspections
The Public Company Accounting Oversight Board voted today to charge fees on 640 B-Ds to help pay for examinations of their auditors. Non-custodians may get off the hook, though.
JAN 11, 2012
By  John Goff
The biggest U.S. broker-dealers will have to pay more than $1 million a year to finance inspections of the firms that audit them under a regulatory program prompted by revelations related to Bernard Madoff's Ponzi scheme. The Public Company Accounting Oversight Board voted 5-0 today to establish a temporary system for monitoring auditors of broker-dealers that will give the Washington-based watchdog time to determine what a permanent system should look like. “If we find violations of law, we won't wait to act on them,” Chairman James R. Doty said in remarks before the vote. “We will use our disciplinary authority in any appropriate cases of auditor misconduct.” The PCAOB's new program requires U.S. broker-dealers to fund the estimated $14.4 million inspections program, which could amount to more than $1 million for the largest firms. The board said 640 brokerages will be charged this year, with fees assessed in proportion to a firm's net capital. The fee structure was also passed by the board with a 5-0 vote. Companies such as Goldman Sachs Group Inc. and Morgan Stanley can expect the new fees to be assessed on their broker- dealers, separately from fees already assessed on parent companies for the PCAOB's existing public-company audit inspections. Lawmakers included expanded oversight of broker-dealers in the Dodd-Frank Act last year after it was revealed that Madoff conducted his multibillion-dollar fraud while his brokerage was being audited by a small firm operating out of a 13-by-18-foot storefront. The regulatory overhaul eliminated a system in which auditors had to register with the PCAOB but weren't overseen by the panel. Non-Custodial Auditors A group of U.S. House members who are also accountants urged the PCAOB in a Feb. 14 letter to focus the program on brokers who have custody of client assets, not those who don't. “We urge the PCAOB to act quickly to begin an effective and targeted inspection program over these auditors,” the lawmakers wrote. The board focused much of its discussion today on whether or not auditors of “introducing” broker-dealers, or those who don't hold client funds, should be exempted in the permanent program. “We may be able to narrow the scope and cost of the law to focus on areas where our oversight would make a difference,” Doty said. Permanent Program Inspections under the temporary program won't produce public reports on individual firms, and most broker-dealer auditors won't see inspectors in that time. The permanent program is expected to be established in 2013. The PCAOB, a nonprofit corporation funded by fees on public companies, regulates and inspects about 2,500 registered auditors under the authority of the Securities and Exchange Commission. Board votes need to be approved by the SEC, which is scheduled to consider a related rule change tomorrow. In other business at today's meeting, the board raised the threshold for the size of public companies charged fees to fund the PCAOB's wider inspections program. The board moved the minimum from $25 million in market cap to $75 million, relieving about 1,100 smaller companies from the fees. For investment companies, which carry a higher threshold, the board moved it from $250 million to $500 million. --Bloomberg News--

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.