Criminal Defense Lawyers

Can the SEC Go After My CPA License?

That letter from the SEC just changed everything. Your hands are shaking—maybe you’ve already read it three times, four times, trying to make sense of the legal language. Look, I get it. You’ve spent years building your career as a CPA, and now the Securities and Exchange Commission is asking questions. Or worse. Maybe it’s a subpoena. Maybe it’s what they call a Wells Notice.

Here’s what’s probably running through your head right now: Am I going to lose my license? Am I going to lose everything I’ve worked for?

Real talk: the situation is serious. But it’s also more complicated than you probably think—and in some ways, that complexity actually works in your favor. The SEC’s authority over your CPA license isn’t what most people assume it is. Let me explain what’s really going on here, what the SEC can actually do, and what you need to do right now to protect yourself.

Can the SEC Actually Take My CPA License Away?

Here’s something that surprises a lot of CPAs: the SEC cannot directly revoke your CPA license. They literally don’t have that power.

Your CPA license comes from your state Board of Accountancy—Texas, California, New York, wherever you’re licensed. The SEC is a federal agency. Different jurisdiction entirely. They can’t reach over and grab your state-issued credential. That’s not how it works.

But—and this is a big but—what they can do is almost as devastating.

Under SEC Rule 102(e), the Commission has authority to “censure a person or deny, temporarily or permanently, the privilege of appearing or practicing before it.” In plain English? They can bar you from doing any work that involves SEC filings. No more auditing public companies. No more signing off on 10-Ks and 10-Qs. No more practicing before the Commission in any capacity.

For a lot of CPAs—especially those in public accounting—that’s their entire practice. Gone.

So technically, no, the SEC can’t take your license. But practically speaking? They can make it nearly worthless for the work you’ve been doing.

The Domino Effect Nobody Warns You About

Here’s where it gets worse. Because the SEC action doesn’t happen in isolation.

Most states—I’m talking about Florida, Washington, Texas, and dozens of others—have provisions that allow their state boards to take disciplinary action against a CPA based on federal agency sanctions. What does that mean in practice?

It means one investigation can become two. Or three.

You get barred by the SEC. Your state board finds out (more on that in a minute). They open their own investigation. Now you’re defending yourself on multiple fronts simultaneously, and the SEC action becomes evidence in the state proceeding. I’ve seen it happen. It’s not pretty.

Bottom line: the SEC can’t directly revoke your CPA license, but they can start a chain reaction that ends with exactly that result.

What Can the SEC Actually Do to Me?

Alright, so we’ve established that the SEC can’t directly revoke your license. But let’s get real specific about what they can do—because understanding the sanctions is key for understanding what you’re up against.

According to data from Vedder Price, in just the first few months of 2016, the SEC issued 32 enforcement releases regarding individual CPA respondents. Of those 32, fourteen—that’s nearly half—involved sanctions under Rule 102(e)(1). The SEC is actively going after accountants, and the numbers bear that out.

Under Rule 102(e), there are basically three things the SEC can do to you:

1. Censure – This is the lightest sanction. Basically a formal reprimand. It goes on your record, it’s public, but you can still practice before the Commission. Think of it like a warning shot.

2. Temporary Suspension – You’re barred from practicing before the SEC, but only for a specific period. Could be 6 months, could be a year, could be longer. When the suspension ends, you can apply to resume practice.

3. Permanent Bar – This is the nuclear option. You’re done. No more SEC practice, potentially ever. Though—and this is important—even “permanent” bars sometimes allow you to apply for reinstatement after a certain period.

Which one you face depends on what you allegedly did and how bad it was.

Three Ways to Get Hit With Rule 102(e)

The SEC can come after you under Rule 102(e)(1)(ii) for something called “improper professional conduct.” And here’s the thing that catches a lot of CPAs off guard—you don’t have to commit fraud to face sanctions.

There are three pathways to getting sanctioned:

First pathway: Intentional or knowing conduct that violates professional standards. This one’s obvious—you knew what you were doing was wrong and did it anyway.

Second pathway: A single instance of “highly unreasonable” conduct that violates professional standards in situations where “heightened scrutiny” was warranted. In other words, one really bad mistake on something you should have been extra careful about.

Third pathway: Repeated instances of unreasonable conduct that indicate a “lack of competence” to practice before the Commission. Multiple screw-ups that suggest you just don’t know what you’re doing.

That second pathway is the one that trips people up. One mistake. One audit where you missed something you shouldn’t have missed. That can be enough—if the circumstances were serious enough to warrant “heightened scrutiny.”

The Steadman Factors: What Determines Your Fate

When the SEC decides what sanction to impose, they look at what are called the “Steadman factors.” These come from case law, and they’re basically the criteria for how bad your punishment will be:

• How egregious were your actions?
• Was this an isolated incident or a pattern?
• What was your level of scienter (legal term for “did you know what you were doing”)?
• How sincere are your assurances against future violations?
• Do you recognize that what you did was wrong?
• What’s the likelihood you’ll have opportunities to violate again?

These factors actually give you some room to work with. More on that in the defense section.

PCAOB: The Third Player You Might Not Know About

If you audit public companies, you’re not just dealing with the SEC. There’s also the Public Company Accounting Oversight Board—the PCAOB.

Created by Sarbanes-Oxley, the PCAOB can independently sanction auditors for violating auditing standards. And here’s the kicker: under Rule 102(e)(3), the SEC can automatically suspend or bar you based on a PCAOB sanction, without conducting its own investigation.

So now you’ve got three potential enforcement bodies: the SEC, the PCAOB, and your state board. Each one can take independent action. Each one can trigger action by the others.

It’s not a great position to be in.

Financial Penalties: Beyond the Bar

The sanctions we’ve been talking about—censure, suspension, bar—those are the professional consequences. But there’s also the financial side.

The SEC can require disgorgement—meaning you have to give back the fees you earned from the problematic engagement. Made $100,000 auditing a company where you violated independence rules? That money’s going back.

Then there are civil monetary penalties on top of that. The Clark Schaefer Hackett case we’ll discuss later involved a $50,000 penalty in addition to disgorgement. And that’s a relatively modest penalty by SEC standards.

And don’t forget the costs you’ll incur defending yourself. Experienced SEC defense counsel isn’t cheap—we’re talking potentially hundreds of thousands in legal fees depending on how far the case goes. Plus expert witnesses, document review, time away from your practice. The full financial picture is often much uglier than people initially expect.

The Investigation Process: What to Expect

Before any sanctions come down, there’s an investigation. Here’s what that typically looks like:

The SEC’s Division of Enforcement handles investigations. They can issue subpoenas for documents—your work papers, emails, correspondence with the audit client. They can compel testimony from you and your colleagues. They can dig into everything.

The investigation can take months. Sometimes years. During this time, you’re in limbo—you know something’s coming, but you don’t know exactly what. It’s stressful as hell, frankly.

If the investigation staff decides to recommend enforcement action, that’s when you get the Wells Notice we talked about earlier. The Wells Notice is your chance to respond before formal charges are filed. After that response—if the SEC still wants to proceed—they file an Order Instituting Proceedings, and you’re into the formal enforcement phase.

Some cases settle before they ever get public. Some go all the way through administrative hearings. The path depends on the facts, the strength of the SEC’s case, and the defense strategy.

Will My State Board Find Out?

Short answer: almost certainly yes.

Most states require CPAs to self-report any sanctions or disciplinary actions by federal agencies. We’re talking 30 days typically—sometimes less. If the SEC suspends or bars you, you have to tell your state board. Failure to report? That’s a separate violation.

And even if you somehow don’t report, the state boards have their own monitoring systems. According to AICPA guidelines, the Professional Ethics Division “monitors the disciplinary actions of various state licensing boards, as well as receives referrals from federal agencies such as the Securities and Exchange Commission.”

In other words, the system is designed for information to flow. The SEC takes action, and that information makes its way to state boards almost automatically.

Reciprocal Discipline: One Action Becomes Two

Here’s where the domino effect really kicks in.

Many states have what’s called “reciprocal discipline” provisions. What that means is: if another jurisdiction—including a federal agency—takes disciplinary action against you, your state board can take similar action without conducting its own full investigation.

Washington state law, for example, explicitly allows action against a CPA license for “suspension or revocation of the right to practice matters relating to public accounting before any state or federal agency.” And it goes further: “a certified copy of such revocation, suspension, or refusal to renew shall be prima facie evidence” of grounds for state discipline.

Translation: the SEC order itself becomes evidence against you in state proceedings. You don’t get a clean slate just because it’s a different jurisdiction.

Florida’s regulations are similar. Texas too. The pattern is consistent across most states.

AICPA Automatic Actions

If you’re an AICPA member—and most CPAs are—there’s another layer. Under AICPA bylaws, the organization can expel or suspend a member without a hearing if “the member’s certificate as a CPA or license to practice is suspended or revoked.”

So SEC action triggers state board action, which triggers AICPA action. The dominoes just keep falling.

What Triggers SEC Enforcement Against CPAs?

Now let’s talk about what actually gets CPAs in trouble with the SEC. Because understanding the triggers is how you avoid them—or at least how you assess your current situation.

Independence Violations: The Most Common Trap

If I had to point to one thing that gets more CPAs in trouble than anything else, it’s independence violations.

Regulation S-X Rule 2-01 lays out detailed requirements for auditor independence. There are ten categories of non-audit services you absolutely cannot provide to an audit client:

• Bookkeeping or accounting record preparation
• Financial information systems design and implementation
• Appraisal or valuation services
• Actuarial services
• Internal audit outsourcing
• Management functions
• Human resources
• Broker-dealer services
• Legal services
• Expert services unrelated to the audit

Violate any of these while you’re also doing the audit? You’ve got an independence problem.

Partner Rotation: Another Independence Trap

Independence isn’t just about what services you provide. It’s also about how long you’ve been on the engagement.

Under SEC rules, the lead audit partner is limited to five consecutive years on the same engagement. Other audit partners are limited to seven years. After that, there’s a mandatory “cooling off” period before you can return to that client.

Why does this matter for enforcement? Because if you’ve been on a client too long—if you’ve exceeded those rotation limits—that’s an independence violation all by itself. Even if you did everything else right. Even if the audit was technically sound. The rotation violation alone can trigger SEC action.

I’ve seen firms get tripped up by this one. They think they’re compliant, but they miscounted the years, or they didn’t properly track which partners qualify as “audit partners” under the rules. It’s a technical violation that can have serious consequences.

The Clark Schaefer Hackett Case: A 2024 Wake-Up Call

Let me give you a real example. In 2024, the SEC went after Clark Schaefer Hackett & Co. for auditing Lordstown Motors’ 2019 financial statements while simultaneously providing bookkeeping and financial statement preparation services.

That’s a clear independence violation—you can’t both prepare the books and audit them. The result? Disgorgement of fees earned, a $50,000 penalty, and mandatory retention of an independent compliance consultant.

$50,000 might not sound catastrophic. But that’s just the penalty. Add in legal fees, the compliance consultant costs, the reputational damage, and the potential state board action? The real cost is much higher.

Other Common Triggers

Independence violations aren’t the only way to get in trouble. Other common triggers include:

Audit failures – Violating Generally Accepted Auditing Standards (GAAS) or PCAOB standards. Missing material misstatements. Inadequate audit documentation. Insufficient professional skepticism.

Enabling client fraud – If your client was cooking the books and you either participated or were negligent in not catching it, you’re exposed. The SEC has made clear they’re targeting “gatekeepers” who fail to prevent fraud.

False statements – Misrepresenting your independence in audit reports. Signing off on financials you knew were wrong. Lying to SEC investigators.

And remember that “highly unreasonable conduct” standard we talked about earlier. One bad audit. One time you missed something you shouldn’t have missed. That can be enough if the circumstances were serious.

How Do I Defend Myself?

Alright. So you’re facing SEC scrutiny—or you’re worried you might be. What do you actually do?

The Wells Notice: Your Most Important 30 Days

If you receive a Wells Notice, pay attention. This is the SEC telling you they’ve completed their investigation and are planning to recommend enforcement action.

But here’s the thing—it’s also your opportunity. The Wells Notice gives you a chance to submit a written response before the SEC files formal charges. This is your window to present your side, argue why action isn’t warranted, or negotiate a lesser sanction.

Do not waste this window. Do not try to handle it yourself. This is when you need experienced federal securities defense counsel. Not next week. Now.

Defense Strategies That Actually Work

According to practitioners who defend accountants in these cases, effective defense approaches include:

Challenging the evidence – The SEC’s rules of evidence in administrative proceedings are different from court. Hearsay can be admissible. But that doesn’t mean everything they have is solid. Your counsel can challenge document authenticity, testimony credibility, and whether the SEC actually proved its case.

Presenting compliance proof – If you can show you actually did follow professional standards—that the SEC’s interpretation is wrong—that’s a defense. Bring in expert witnesses. Show your work papers. Demonstrate your audit approach was sound.

Distinguishing your case – The SEC often relies on precedent from prior cases. But every case is different. If you can show why prior cases don’t apply to your situation, you can undermine their argument.

Mitigating factors – Remember those Steadman factors? Use them. If this was isolated, if you’ve already taken corrective action, if you’ve acknowledged the problem and shown why it won’t happen again—all of that matters.

The Settlement Decision

Here’s a hard truth: most CPAs facing SEC action end up settling rather than fighting to the end.

The SEC offers consent procedures where you can resolve the matter without admitting or denying the charges. Fighting administratively is expensive, time-consuming, and—because the rules favor the agency—often unsuccessful.

But settlement isn’t automatically the right choice. It depends on the strength of their case, the sanctions they’re seeking, and your willingness to accept those consequences. This is a smart decision that requires experienced judgment.

Know Your Rights in the Process

Even though administrative proceedings are stacked in the SEC’s favor in some ways, you still have rights. Important ones.

You have the right to counsel—and you should absolutely exercise it. You have the right to review the evidence against you. You have the right to present your own evidence and witnesses. You have the right to cross-examine the SEC’s witnesses.

And here’s something people forget: you have the right to a public hearing if you want one. Some CPAs prefer to keep things private, but sometimes a public hearing actually works in your favor—especially if you believe the SEC overreached and you want the record to show that.

According to legal experts, court challenges to SEC decisions face major deference to the agency’s expertise. Winning on appeal is hard. That’s why the strategy at the initial hearing matters so much—it’s often your best and only real shot.

Can I Ever Practice Again?

If you do get barred—whether temporarily or “permanently”—is that it? Is your career over?

Not necessarily.

Reinstatement Exists

Under Rule 102(e)(5), you can apply for reinstatement from an SEC bar. The rule states that an application “may be made at any time.” The Commission has discretion to grant reinstatement “for good cause.”

What counts as good cause? Typically you’d need to show:

• Sufficient time has passed
• You’ve maintained a clean record since the bar
• You’ve taken steps to ensure compliance going forward
• You understand what you did wrong
• There’s no ongoing risk to investors if you’re reinstated

It’s not easy. The Commission has full discretion, and they don’t have to grant reinstatement. But it is possible.

Your State License May Survive

Here’s something important: even if the SEC bars you from practicing before the Commission, that doesn’t automatically mean you lose your state CPA license.

Yes, many states can take reciprocal action. But they don’t always. And even if they do, the sanctions might not be identical. You might face a suspension rather than revocation. You might keep your license but with conditions.

And your state license opens doors the SEC bar doesn’t close. Tax work. Private company accounting. Consulting. Forensic accounting. There’s a lot of CPA work that doesn’t involve SEC filings.

Life After SEC Sanctions

Look, I’m not going to pretend this isn’t serious. An SEC bar or suspension is a major career setback. It’s public. Future employers will know. Your reputation takes a hit.

But it’s not the end. Plenty of CPAs have faced SEC sanctions and rebuilt their careers. Some moved into industry. Some pivoted to private company work. Some focused on tax or consulting. Some eventually got reinstated and returned to public company work.

The key is having a plan. Understanding your options. Not giving up.

Consider Your Malpractice Insurance

Here’s something else to think about: what does your professional liability insurance cover?

Many malpractice policies provide coverage for defense costs in regulatory proceedings, including SEC investigations. Check your policy. If you have coverage, notify your carrier early—they may have requirements about when and how you report potential claims.

Some policies also cover settlements and certain penalties. Some don’t. The terms vary widely. Knowing what you have before you’re deep into the process can affect your strategy and your financial planning.

And if you don’t currently have coverage—well, it’s probably too late to get it for an existing situation. But it’s a lesson for the future. Regulatory defense coverage isn’t optional in this environment.

What Should I Do Right Now?

If you’re reading this because you’re facing SEC scrutiny—an investigation, a subpoena, a Wells Notice—here’s what you need to do immediately:

1. Preserve everything. Do not delete emails. Do not destroy documents. Document destruction after you know there’s an investigation is obstruction of justice. It’s a separate crime. Don’t make your situation worse.

2. Get experienced counsel. This is not the time for your family lawyer or your buddy from law school. You need someone who specifically handles SEC enforcement defense. Someone who knows the rules, knows the players, knows the system. Get that person on the phone today.

3. Understand the timeline. If you’ve received a Wells Notice, you typically have 30 days to respond. That clock is ticking. Don’t waste it.

4. Don’t talk to investigators without counsel. I know it’s tempting to think you can explain everything, clear things up. You can’t. Anything you say can and will be used against you. Let your lawyer handle communications.

5. Start thinking about your state board. Depending on how this goes, you may need to report SEC action to your state. Get ahead of that. Understand your reporting obligations. Consider whether proactive disclosure to the state board might actually help your position.

The Bottom Line

Can the SEC go after your CPA license? Not directly—they don’t have that power. But they can bar you from practicing before them, which for many CPAs is effectively the same thing. And that action can trigger state board discipline, AICPA action, and a cascade of consequences that does put your license at risk.

The situation is serious. But it’s not hopeless.

With the right defense, the right strategy, and prompt action, many CPAs get through SEC enforcement successfully. Some avoid sanctions entirely. Some negotiate lesser sanctions. Some get reinstated after sanctions. Some pivot their careers and thrive in different areas of accounting.

What you can’t do is ignore it. What you can’t do is try to handle it alone. What you can’t do is wait and hope it goes away.

The clock is running. Get experienced counsel. Understand your options. Fight smart.

Your career isn’t over—unless you let it be.