SEC Charges International Accounting Firm Prager Metis with Hundreds of Auditor Independence Violations

The Securities and Exchange Commission (SEC) has taken legal action against Prager Metis CPAs, LLC, and its California-based counterpart, Prager Metis CPAs LLP (together referred to as Prager), on charges related to violations of auditor independence rules and their involvement in aiding and abetting their clients’ breaches of federal securities laws.

According to the SEC’s allegations, Prager engaged in improper practices between approximately December 2017 and October 2020. During this period, they included indemnification provisions in engagement letters for over 200 audits, reviews, and exams. This conduct, the SEC asserts, rendered Prager non-independent from their clients for those specific engagements, a violation of federal securities laws. Notably, Prager persisted in signing engagement letters containing these indemnification provisions and issued “accountant’s reports” asserting their independence during audits and exams, even after their senior partners were repeatedly alerted to the non-compliance. Additionally, a significant number of Prager’s clients incorporated these “accountant’s reports” into their filings with the SEC. Furthermore, Prager allegedly failed to inform their clients of these violations, even after being notified by the Public Company Accounting Oversight Board (PCAOB) that the inclusion of indemnification provisions in engagement letters contravened the independence requirements mandated by federal securities laws.

Eric I. Bustillo, Director of the SEC’s Miami Regional Office, emphasized the critical importance of auditor independence in preserving the credibility of financial reporting and fostering public trust. Bustillo stated, “As alleged in our complaint, over a period of nearly three years, Prager’s audits, reviews, and exams fell short of these fundamental principles. Our complaint is an important reminder that auditor independence is crucial to investor protection.”

The SEC’s complaint has been filed in the U.S. District Court for the Southern District of Florida and outlines charges against Prager for violating auditor independence provisions under federal securities laws and aiding and abetting their clients in violating federal securities laws. As part of the legal action, the SEC is seeking a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, and the imposition of a civil monetary penalty against Prager.

If you suspect your advisor mismanaged your money or committed negligence or fraud, call Sonn Law Group for a free consultation at 833-912-3000 today.