The SEC barred an audit partner from appearing before the Commission because his firm violated the broker-dealer auditor independence rule by also providing FINOP services.  The SEC alleges that the respondent and his firm (which was also charged) continued to provide FINOP services to an audit client after the respondent’s prior firm was acquired by the auditing firm.  The SEC alleges that the respondents tried to circumvent the auditor independence rules by paying a third person to serve as the broker-dealer’s FINOP and by conducting the FINOP services when the independent consultant was unavailable.  The SEC claims that the respondents knew about the independence rules, which require an independent auditor to conduct the annual audit.  The SEC asserts that FINOP services are non-audit services that compromise independence because such services are management functions that include compliance with net capital rules and preparing financial reports.  The SEC charges that the respondent caused the broker-dealer’s violations of Rule 17a-5(d)(1).

OUR TAKE: It appears that the respondents tried to bypass the spirit of the rule with a jerry-rigged arrangement with an independent consultant.  Was the bar from the industry really worth the incremental revenue?