Capital Markets & Securities Law Watch

The Securities and Exchange Commission recently approved the Public Company Accounting Oversight Board’s new quality control standard, which will require all registered public accounting firms to identify specific risks to their practices and design a quality control system to monitor and resolve ineffective controls.

On May 3, 2024, the SEC announced charges against audit firm BF Borgers CPA PC and its owner, Benjamin F. Borgers, of deliberate and systemic failures to comply with PCAOB standards in its audits and reviews incorporated in over 1,500 SEC filings from January 2021 through June 2023, in what the SEC called “one of the largest wholesale failures by gatekeepers in our financial markets.” In this post, we review the SEC’s order and the SEC staff’s statement regarding the disclosure and reporting obligations of impacted issuers.

On August 26, 2022, the U.S. Public Company Accounting Oversight Board (the PCAOB) announced a Statement of Protocol (the SOP) with the China Securities Regulatory Commission (the CSRC) and Ministry of Finance of China (MOF) in respect of cooperation on the oversight of PCAOB-registered public accounting firms based in mainland China and Hong Kong. This represents a first and meaningful move to address the decade-long audit oversight conflict between the PCAOB and regulators in the People’s Republic of China (the PRC).

On November 17, 2021, the Securities and Exchange Commission (SEC) adopted amendments to the federal proxy rules to require the use of a universal proxy card in public solicitations involving contested director elections where a dissident shareholder seeks to solicit proxies for a slate of candidates other than the company nominees. The universal proxy rules will become effective for any shareholder meeting involving a contested election held after August 31, 2022.

On November 5, 2021, the SEC approved Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act, of the Public Company Accounting Oversight Board (PCAOB). Rule 6100 establishes a framework for the PCAOB’s determinations under the Holding Foreign Companies Accountable Act (HFCAA) that the PCAOB is unable to inspect or investigate completely registered public-accounting firms located in a foreign jurisdiction because of a position taken by an authority in that jurisdiction. Rule 6100 is effective immediately.

On June 4, 2021, the Securities and Exchange Commission (SEC) removed Chairman William Duhnke of the Public Company Accounting Oversight Board (PCAOB), the auditor watchdog.

On December 18, 2020, President Trump signed into law the “Holding Foreign Companies Accountable Act” (the Act), requiring foreign companies and their auditing firms to submit to U.S. regulator inspections of their audits—or face trading prohibitions on U.S. stock exchanges and over-the-counter markets for failure to have an inspection for three consecutive years.

On November 23, 2020, the Division of Corporation Finance (the Division) of the U.S. Securities and Exchange Commission (the SEC) released new disclosure guidance on the Division’s views regarding disclosures for companies based in, or with the majority of their operations located in, China.