Richard Hong Quoted in Bloomberg Tax on SEC’s Dropped Auditor Misconduct Cases Following Jarkesy Ruling

Partner Richard Hong was quoted in a Bloomberg Tax article entitled “SEC Drops Auditor Misconduct Cases After In-House Judges Ruling.” The article examined the SEC’s decision to drop charges against at least eight auditors facing SEC charges for inadequate audit work that failed to detect misstatements and, in some cases, fraud.

Securities lawyers say the regulator is responding to the Supreme Court's June SEC v. Jarkesy ruling, which limited the SEC's authority to handle securities fraud cases through administrative proceedings and mandated that they be tried by a jury instead. Richard, a former SEC trial lawyer and federal prosecutor, explained that bars and suspensions could be considered punitive under the Jarkesy decision. “The SEC might be concerned that Jarkesy can be read broadly to cover those things,” he stated.

While the SEC is now being more strategic in the wake of Jarkesy, Richard surmised that the regulator’s administrative options have not ended entirely. “It is severely impaired, but I don’t think it’s dead,” he said.

Read the full article here.