SEC Staff Reminds Issuers of Reporting and Disclosure Requirements In View of Order Against Auditing Firm BF Borgers

The SEC has released a statement to “assist issuers in complying with their disclosure and reporting obligations” in view of its recent administrative and cease-and-desist order against the auditing firm BF Borgers CPA PC, which the SEC found to have committed numerous audit-related violations under PCAOB and SEC standards. Specific findings against BF Borgers include that it (1) “deliberately and systematically failed to conduct audits and quarterly reviews in accordance with applicable [PCAOB] standards”; (2) “fraudulently issued audit reports that falsely represented that audits had been performed in accordance with PCAOB standards”; and (3) “caused audit clients to violate certain provisions of the Exchange Act and rules thereunder, including Exchange Act Sections 13(a) and 15(d).”

Because BF Borgers is now “denied the privilege of appearing or practicing before the Commission as an accountant,” issuers that had previously engaged this auditing firm as their independent auditor may need to take certain actions. These include:

• Filing a Form 8-K, Item 2.01, “when BF Borgers resigns or is dismissed.”
• Engaging “a new qualified, independent, PCAOB-registered public accountant.”
• Issuers “with a pending registration statement that contains or incorporates by reference financial information audited or reviewed by BF Borgers would need to file a pre-effective amendment to include financial information audited or reviewed, as applicable, by a qualified, independent accountant that is permitted to appear or practice before the Commission.”
• Issuers “with a pending Regulation A offering statement requiring audited financial statements in which any financial statements have been previously audited by BF Borgers would need to file a pre-qualification amendment to include financial statements audited by a qualified, independent accountant that is permitted to appear or practice before the Commission.”

In light of the suspension of BF Borgers, the SEC has also released an order that “provides an additional period of time for the filing of quarterly and transition reports on Form 10-Q for issuers that have filed a timely Form 12b-25 notifying the Commission of their inability to file a report on a timely basis.” The purpose of the extension is to give registrants affected by the suspension more time to “hire a new, qualified, independent, PCAOB-registered public accountant and file with the Commission financial information that complies with the requirements of the federal securities laws.”