Prager Metis CPAs, LLC, and Prager Metis CPAs LLP

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 25868 / September 29, 2023

Securities and Exchange Commission v. Prager Metis CPAs, LLC, et al., Case No. 1:23-cv- 23723 (S.D. Fla. filed September 29, 2023).

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

The Securities and Exchange Commission today charged accounting firm Prager Metis CPAs, LLC and its California professional services firm, Prager Metis CPAs LLP, (together, Prager) for violating auditor independence rules and for aiding and abetting their clients’ violations of federal securities laws.

The SEC’s complaint alleges that, between approximately December 2017 and October 2020, Prager improperly included indemnification provisions in engagement letters for more than 200 audits, reviews, and exams. As a result, the complaint alleges, Prager was not independent from its clients for those engagements, as required under the federal securities laws. The SEC alleges that Prager continued to sign engagement letters containing indemnification provisions and also issued “accountant’s reports” in which it purported to be independent in connection with its audits and exams, even after Prager’s senior partners repeatedly were notified that inclusion of indemnification provisions in engagement letters rendered Prager not independent. Many of Prager’s clients included those “accountant’s reports” in their filings with the SEC. Prager allegedly also failed to advise its clients of its violations, even after the Public Company Accounting Oversight Board informed Prager that the indemnification provisions violated the independence requirements of the federal securities laws.

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, charges Prager with violating Rule 2-02(b) of Regulation S-X and Rule 17a-5(i) under the Securities Exchange Act of 1934 (“Exchange Act”), and aiding and abetting its clients’ violations of the federal securities laws, including Sections 13(a), 15(d), and 17(a) of the Exchange Act and Rules 13a-1, 13a-11, 13a-13, 15d-1, 15d-13, and 17a-5 thereunder and Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-2 thereunder. The complaint seeks a permanent injunction, disgorgement plus prejudgment interest, and a civil money penalty against Prager.

The SEC’s ongoing investigation is being conducted by Drew D. Panahi, Michelle Bosworth, and Carol Der Garry, and supervised by Thierry Olivier Desmet, Fernando Torres, and Glenn S. Gordon in the Miami Regional Office. The SEC’s litigation is being led by Christine Nestor and supervised by Teresa Verges in the Miami Regional Office.

• SEC Complaint