On July 2, 2013, the SEC announced the creation of the Financial Reporting and Audit Task Force, the Microcap Task Force and the Center for Risk and Quantitative Analytics with the goal of combating fraudulent financial reporting, microcap fraud and enhancing risk analysis throughout the SEC.
Financial Reporting and Audit Task Force
The Financial Reporting and Audit Task Force’s main goal will be fraud detection and increased prosecution of violations involving false or misleading financial statements and disclosures. The Financial Reporting and Audit Task Force will focus on identifying and exploring areas susceptible to fraudulent financial reporting, including ongoing review of restatements and revisions of financial statements, analysis of performance trends by industry, and use of technology-based tools such as the Accounting Quality Model. In addition, it expands and strengthens the SEC’s Enforcement Division’s efforts to identify securities law violations relating to the preparation of financial statements, issuer reporting and disclosures, and audit failures.
Microcap Fraud Task Force
The Microcap Fraud Task Force will build on the work of the Microcap Fraud Working Group, which will continue in existence. The Microcap Fraud Task Force will consist of SEC staff dedicated exclusively to investigations of fraud by participants in the microcap securities market, especially those known as “gatekeepers” (i.e., attorneys, auditors, broker-dealers, transfer agents, stock promoters and purveyors of shell companies), and will investigate the issuance, marketing and trading of microcap securities, including through websites and social media.
Center for Risk and Quantitative Analytics
The Center for Risk and Quantitative Analytics (CRQA) will serve as a central point of contact for risk-based initiatives nationwide as both an analytical hub and source of information about characteristics and patterns indicative of possible fraud or other illegal activities. CRQA will assist the SEC’s Enforcement Division by identifying risks and threats that could harm investors, helping SEC staff nationwide in conducting risk-based investigations, and developing methods of monitoring for signs of possible wrongdoing and illegal activities.
SEC Press Release: