The Public Company Accounting Oversight Board (PCAOB or the Board), on Monday, February 4, indicated a new focus of its enforcement program in the New York region. The PCAOB announced the creation of a new position within its Division of Enforcement and Investigations: New York Office Regional Associate Director. Filling the new position will be C. Ian Anderson, former Senior Trial Counsel in the Miami office of the SEC Division of Enforcement. In his prior role at the SEC, Mr. Anderson prosecuted cases involving accounting fraud, registration violations, failure to supervise trading activity, and other federal securities law violations.1
The PCAOB, created by the Sarbanes-Oxley Act of 2002, has regulatory authority over auditors of publicly traded companies and broker-dealers. The Board devotes the majority of its resources towards performing regular inspections of PCAOB-registered audit firms. The PCAOB’s regional offices (those outside Washington, DC) are spread across the United States and have focused on performing inspections. The Board has staffed certain of its regional offices with deputy directors of its Division of Registration and Inspections.
The Division of Enforcement and Investigations, on the other hand, has been a much smaller aspect of the PCAOB’s total activity.2 It has been centrally located and staffed in the PCAOB’s Washington, DC headquarters. The hiring of Mr. Anderson to fill this new position in the PCAOB’s New York regional office represents a significant new step for the PCAOB’s enforcement regime and suggests a potential increase in PCAOB investigations and enforcement actions in the New York area.
This new hiring may also signal an increase in the PCAOB’s enforcement activity related to its jurisdiction over broker-dealer audits. The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in July 2010, gave the PCAOB the authority to oversee the audits of broker-dealers, and the Board’s first inspections of broker-dealers commenced in August 2011. Those inspections culminated in a summary report on the inspections of broker-dealers issued August 20, 2102.3 That report found audit deficiencies in all of the audits the PCAOB inspected. PCAOB Board members have referred to these results as “disturbing” and the PCAOB is continuing to ramp up its inspections of broker-dealer auditors.4
The maturation of the PCAOB’s inspection program for broker-dealer audits will invariably lead to an increased enforcement focus in this area. Given New York’s status as the hub of broker-dealer activity, it is likely that any serious enforcement focus will be centered in the PCAOB’s New York Regional Office, which will now be led by Mr. Anderson.