Davidson & Company LLP Settles SEC Charges for Violating Auditor Independence Requirements

ADMINISTRATIVE PROCEEDING
File No. 3-22366

December 19, 2024 - The Securities and Exchange Commission today charged Davidson & Company LLP ("Davidson"), a Vancouver-based audit firm, and two of its partners, Erez Bahar and Grant Block, with violating auditor independence rules. The SEC's Order finds that between 2019 and 2023, Davidson failed to comply with audit partner rotation requirements during the course of the firm's engagement as the independent auditor for nine U.S.-issuer clients and that Bahar and Block caused Davidson's violations.

The Securities Exchange Act of 1934, the Exchange Act's Regulation S-X, and Public Company Accounting Oversight Board Auditing Standards mandate that audit partners serving as lead or concurring partners rotate off of engagements after prescribed periods of time to maintain auditor independence. During the relevant time period, Davidson and its partners, including Bahar and Block, failed to comply with these requirements, impairing the firm's independence on 11 annual audits and 26 interim reviews, and further caused the issuer clients to violate their reporting obligations. Furthermore, a deficient system of quality controls and monitoring and lack of diligent firm management by the firm's current and former managing partners, Bahar and Block, respectively, contributed to these failures.

The SEC's Order finds that Davidson violated and Bahar and Block caused Davidson's violations of Section 10A(j) of the Exchange Act and Rule 10A-2 thereunder and Rule 2-02(b)(1) of Regulation S-X; it also finds that Respondents caused certain of the issuer clients to violate Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder. Without admitting or denying the findings, Respondents agreed to cease and desist from future violations and to pay civil penalties: $265,000 penalty for Davidson, $25,000 penalty for Bahar, and $20,000 penalty for Block. Davidson also agreed to undertakings requiring the firm to engage a compliance consultant to review, test, and evaluate its remedial partner rotation controls. In determining to accept the offers, the Commission considered remedial acts promptly undertaken by Davidson and its partners and cooperation afforded to the Commission staff.

The SEC's investigation was conducted by Kendra Kinnaird, Sandhya Harris, and Tonya Tullis and supervised by Sarah Lamoree, Kristen Dieter, Sharan Custer, and Mark Cave. The SEC appreciates the assistance of the Canadian Public Accountability Board.