Claudius Modesti Quoted from Recent Securities Docket Forum on Enforcement, Financial Disclosure and Accounting Fraud

Claudius Modesti, litigation partner at Akin Gump, has been quoted in the article “Enforcement Forum panel tackles financial reporting and accounting fraud,” published on the Jim Hamilton’s World of Securities Regulation blog. The article reports on Securities Docket’s recent Securities Enforcement Forum, at which Modesti spoke on a panel titled “Financial Disclosure and Accounting Fraud,” looking at recent SEC enforcement actions involving financial disclosure and accounting fraud.

One issue discussed by the panel was how SEC staff handles possible enforcement actions involving the accounting of estimates and accruals. Modesti, a former Director of the Public Company Accounting Oversight Board’s Division of Enforcement, recommended that companies develop a sound process for determining estimates, follow it and document it. You need a really good reason for not following the process, he said, and that’s what gets companies in trouble with the SEC.

Looking at the issue of when a company should disclose that it is under investigation by the SEC, Modesti said there is no bright-line rule, such as the receipt of a Wells notice, that should trigger disclosure. Not all Wells notices are the same, he pointed out, and not all investigations carry the same significance.