(The news featured below is a selection from the news covered in Federal Securities Law Reporter, which is distributed to subscribers of Federal Securities Law Reporter.)

Commission Charges Firms, Partners with PCAOB Registration Violations

The SEC charged 69 auditors with issuing audit reports on the financial statements of public companies while they were not registered with the Public Company Accounting Oversight Board. The SEC administrative orders name 37 unregistered audit firms and 32 audit partners who participated in the preparation and issuance of their unregistered firms' audit reports. These firms and partners allegedly did not comply with the Sarbanes-Oxley Act requirement that accounting firms that prepare and issue audit reports on the financial statements of public companies must be registered with the PCAOB.

The SEC issued 29 settled and 10 contested orders. The 69 firms and partners named in the actions were collectively responsible for issuing 60 audit reports for 53 companies between November 2003 and October 2005.

Linda Chatman Thomsen, director of the SEC's Enforcement Division, said that "the Commission is committed to ensuring compliance with the regulatory framework Congress established for auditors of public companies." She added that "when these auditors failed to register with the PCAOB, they violated one of the key requirements of Sarbanes-Oxley and evaded the PCAOB's oversight authority, and the actions we take today protect investors and will deter future violations of Sarbanes-Oxley's registration provision."

There were 28 firms and 22 partners that agreed to settlements in which the Commission found that each audit firm issued between one and eight audit reports while unregistered, and ordered the firms and partners to cease and desist from committing or causing violations of the registration provision of Sarbanes-Oxley Act Section 102(a). The Commission also censured the firms. Additionally, two firms agreed to disgorge audit fees they received for their audits, while the other settling firms that received audit fees returned the fees to their issuers during the course of the Commission's investigation. Without admitting or denying the findings of the orders, each of the settling firms and partners consented to the entry of an order finding that they violated Section 102(a) of the Sarbanes-Oxley Act.

Separately, the SEC issued 10 orders instituting proceedings against non-settling firms and partners. The orders alleged that the firms and partners prepared and issued audit reports that issuers included in filings with the Commission while the firms were not registered with the PCAOB. In the proceedings, the Commission will determine whether, pursuant to Section 4C(a) of the Exchange Act and Rule 102(e)(1), the firms failed to possess the requisite qualifications to represent others and willfully violated Section 102(a) of the Sarbanes-Oxley Act. The SEC will also determine whether the partners failed to possess the requisite qualifications to represent others by participating in the preparation and issuance of audit reports by a firm that was not registered with the PCAOB. All of the proceedings against the non-settling firms and partners will determine what remedial relief, if any, is appropriate, including whether they should be censured or denied the privilege of appearing or practicing before the Commission as accountants.