SEC Chief Accountant Lays a Cobblestone on the Road to Hell Paved with Good Intentions

It is said that the road to hell is paved with good intentions; and in keeping with that thought, the SEC's Chief Accountant has laid another cobblestone:  The Potential Pitfalls of Purported Crypto “Assurance” Work by SEC Chief Accountant Paul Munter
https://www.sec.gov/news/statement/munter-statement-crypto-072723

Introduction[1]

Following the recent waves of scandal and insolvency in the crypto industry, there has been a renewed focus on the firms, including accounting firms, that have been retained by companies in the crypto-asset space—in particular, crypto asset trading platforms. Certain crypto asset trading platforms, with others in the crypto industry, have marketed to investors their retention of third parties, sometimes accounting firms, to perform some sort of review of certain parts of their business, often presented as a purported “audit.” As accounting firms increasingly engage in this sort of non-audit work, their clients’ marketing and terminology risks misleadingly suggesting that these alternative, non-audit arrangements are at parity with, or even more “precise” than, a financial statement audit. Such suggestions are false. Non-audit arrangements are neither as rigorous nor as comprehensive as a financial statement audit, and may not provide any reasonable assurance to investors.

The hazards to investors associated with such characterizations have been publicized by the Commission staff,[2] PCAOB staff,[3] and others. This statement is directed primarily to the accounting profession, including new entrants into non-audit service work for crypto asset clients. Accounting firms that choose to perform work in this space must keep several obligations and hazards front of mind.
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[1] This statement is provided by the staff of the Office of the Chief Accountant (OCA) in their official capacity and does not necessarily reflect the views of the Commission, the Commissioners, or other members of the staff. “Our” and “we” are used throughout this statement to refer to OCA staff.

Bill Singer's Comment

I am no fan of crypto and fear that there is far too much fraud in the area. No -- that doesn't mean that crypto in and of itself is a scam, nor does it mean that the digital concept is invalid. What it does mean is that too many folks who have no idea what crypto is and should not be investing in crypto are, in fact, putting their life savings into this product. It means that intelligent regulation of the sector is long overdue, but, sadly, that effort is hobbled by turf wars between the CFTC and SEC, and further addled by too much posturing and musing. The time for action is long overdue. 

As a libertarian, I don't welcome government intervention into the boardroom or the bedroom; and, keeping with that distrust, I believe that there is a social benefit when those who make foolish investments lose money. It's not the role of government to fix stupid, and it's not the role of government to inject it's concept of reasonable risk into our investment choices. 

When stripped down to basics, SEC Chief Accountant Munter's published Statement is little more than the musings of an unelected official -- Footnote 1 of the Statement acknowledges that Chief Accountant Munter's statement "does not necessarily reflect the views of the Commission, the Commissioners, or other members of the staff." If that's the case (and it is), then why did the Commission permit the publication of this dubious Statement?  There is a cost when the SEC issues endless numbers of concept releases, proposals, statements, and the like. Folks who work on Wall Street are required to read this stuff. That takes time. In some cases, that's time away from more important regulatory and compliance tasks.

If, in fact, Chief Accountant Munter's concerns are valid about the hazards presented by non-audit reviews performed by accountants for crypto trading platforms, then the SEC should file enforcement actions against the perceived miscreants. As a society, we are growing tired of the thoughts and prayers of those in government when confronted by tragedy. There is a time for talk. There is a time for action. In the wake of the FTX collapse, the markets need intelligent rules and effective enforcement. We do not need more threats and warnings from the SEC. The SEC's mandate is not to think out loud but to protect the investing public and regulate the industry. 

Also READ:

A Form Of Lunacy Has Overtaken The SEC (BrokeAndBroker.com Blog / March 16, 2023)
https://www.brokeandbroker.com/6926/sec-lunacy-rulemaking/

A form of lunacy has overtaken the Securities and Exchange Commission. Those in charge seem to have lost any concept of how to rationally manage a finite amount of resources -- both human and otherwise. Unwilling or incapable of stopping, the SEC continues its excessive resort to rulemaking and rule-amending.

There is reach.

There is grasp.

Virtually none of the more recent rule proposals are within the SEC's reach; and, at this moment in history, none seem capable of coming within the federal regulator's grasp.

The SEC crypto agenda is not one of accomplishment but of delay and failure.

Staff morale is reported to be at historic lows.

Hardcore enforcement in furtherance of investor protection seems to be sacrificed on the altar of generating press and marketing the illusion of regulation.

On March 15th, while the markets fell nearly 2% amid a perceived banking crisis, the SEC issued four press releases about rulemaking and amending.  The SEC's focus should -- must -- be on consumer protection and going after fraudsters in court; instead, we get social media and the reallocation of lawyers and investigators to drafting proposals and cite checking. Indeed, there is magic in the air but that is little more than misdirection, smoke, and mirrors.  

SEC Chair Gensler Speaks About Shakespeare and Hammurabi While FTX Dissolves (BrokeAndBroker.com Blog / November 15, 2022)
https://www.brokeandbroker.com/6759/gensler-shakespeare-hammurabi/

What follows is yet another bit of indulgence by those at the SEC who have serious things to do but, instead, find time to give speeches, attend seminars, make podcasts, film videos, and do all sorts of stuff that doesn't quite advance Wall Street reform, doesn't quite protect vulnerable investors, and doesn't quite pursue the scamsters and fraudsters. For several years there has been a clamor to implement some form of crypto regulation. Even if only first-stage in design and with the full intent to adapt on the run. Something, anything might have protected those now devastated by the FTX debacle. Instead, we got nothing. We got regulatory turf wars. We got petulance and inaction. 

• SEC
• Chief Accountant
• Munter
• Crypto
• Trading Platforms
• Audit
• Accountant
• FTX
• BrokeAndBroker
• Bill Singer