SEC Charges Accounting Firm with “Massive Fraud,” May Impact Reg A+ Issuers

The Securities and Exchange Commission (SEC) has charged BF Borgers CPA PC and its owner, Benjamin F. Borgers with deliberate and systemic failures to comply with Public Company Accounting Oversight Board (PCAOB) standards in its audits and reviews incorporated in more than 1,500 SEC filings from January 2021 through June 2023.

The SEC alleges that some audits prepared by the firm did not comply with PCAOB standards, including over 500 public firms.

Without admitting or denying the allegations, BF Borgers has settled the charges paying a $12 million penalty. Owner Borgers has also personally paid a $2 million penalty.

The firm and its founder have also agreed to a permanent suspensions from appearing and practicing before the Commission as accountants, effective immediately.

The SEC’s order claims that of 369 BF Borgers clients whose public filings from January 2021 through June 2023 incorporated BF Borgers’s audits and reviews, at least 75 percent of the filings incorporated BF Borgers’s audits and reviews that did not comply with PCAOB standards.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said the firm was “responsible for one of the largest wholesale failures by gatekeepers in our financial markets.”

“As a result of their fraudulent conduct, they not only put investors and markets at risk by causing public companies to incorporate noncompliant audits and reviews into more than 1,500 filings with the Commission, but also undermined trust and confidence in our markets. Because investors rely on the audited financial statements of public companies when making their investment decisions, the accountants and accounting firms that audit those statements play a critical role in our financial markets. Borgers and his firm completely abandoned that role, but thanks to the painstaking work of the SEC staff, Borgers and his sham audit mill have been permanently shut down.”

As part of the investigation, SEC staff – Division of Corporation Finance Office of the Chief Accountant, have issued a statement. The statement explains:

“A significant number of issuers have engaged BF Borgers to audit or review financial information contained in their Commission filings and will be impacted by the Order. We are issuing this statement to assist issuers in complying with their disclosure and reporting obligations in light of the Order.”

Referring to the Reg A+ exemption which enables online capital formation, the Staff stated:

“Similarly, before the staff could grant a qualification request, in light of the findings in the Order, and because BF Borgers has been denied the privilege of appearing or practicing before the Commission, any issuer 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. Issuers with ongoing Regulation A offerings are reminded that a qualified offering statement must not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading.”



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