Why Would a Firm Refuse To Produce Documents to the SEC?

By  Jasmine Blake-Stewart, Spring 2015 Student Intern

When the Securities and Exchange Commission (SEC) requests documents in an investigation because they suspect fraud, you would expect that the party they are requesting documents from should turn over the documents. Not releasing documents to the SEC during a fraud investigation might make it worse for the company.  Four foreign firms were recently sanctioned for failing to produce documents requested by the SEC.

According to an SEC press release, the SEC recently requested documents from four China-based accounting firms. What did the firms do after this request was demanded? The SEC alleges that the firms willfully and knowingly refused to turn over the documents. The SEC then moved forward and sought sanctions against these four China-based accounting firms.

The firms agreed to settle.  Each will pay $500,000 as part of the settlement and admitted that they did not turn over the requested documents. Not producing the documents to the SEC is a violation of the U.S. rules and Section 106 of the Sarbanes-Oxley Act (2002), which requires foreign public accounting firms to provide work papers to the SEC upon request.

To read more on the SEC imposing sanctions against these four China-based firms for refusing to produce documents visit this SEC Press Release.