Employees at professional services company Ernst & Young (EY) cheated on their ethics exams — leading to a $100 million fine, the U.S. Securities and Exchange Commission (SEC) announced Tuesday.
EY — known as one of the “big four” accounting firms — admitted that a “significant number” of audit professionals cheated on the ethics portion of their certified public accountant (CPA) exams and continuing education courses, according to a press release from the agency. The company also withheld evidence of the misconduct from officials.
“This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our Nation’s public companies,” Gurbir Grewal, director of the SEC’s Enforcement Division, said in the release. “It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things.”
EY will be forced to pay a $100 million penalty and “engage in extensive undertakings” to address the ethics breaches.
“The SEC will not permit the submission of misleading information or any action that delays or frustrates our mandate to protect investors and our markets,” Melissa Hodgman, Associate Director of the SEC’s Enforcement Division, added. “Ernst & Young faces significant sanctions and extensive remediation to ensure that its culture and conduct meet the ethical standards required of those responsible for the integrity of our capital markets.”
EY, based in London, England, joins other leading corporations in denouncing racism and committing to social justice initiatives. “EY is taking actions as a US firm to eradicate racism and discrimination by leveraging our influence to drive strategic change in our firm, in the communities where we work, and through public policy,” the firm said on its website.
However, EY is not the first left-leaning financial services company that has been penalized for its poor ethical standards.
The SEC recently imposed a $1.5 million penalty on BNY Mellon for “misstatements and omissions” concerning its Environmental, Social, and Governance (ESG) social responsibility goals for various mutual funds the investment bank oversaw. The agency said that BNY Mellon’s investment adviser practice “represented or implied in various statements that all investments in the funds had undergone an ESG quality review” between July 2018 and September 2021, although “that was not always the case.”
Likewise, former and current employees at Wells Fargo blame the firm for conducting fake interviews with female and minority applicants to artificially increase diversity numbers. The employees said the interviews were no more than attempts to support diversity goals and avoid regulatory audits. In August 2020, Wells Fargo agreed to pay $7.8 million to settle a U.S. Department of Labor claim saying that the bank discriminated against more than 34,000 African-American applicants for banking, customer sales and service, and administrative support positions, as well as over 300 female applicants for administrative support positions.
Wells Fargo, however, joined other investment banks in their diversity pushes after the death of George Floyd.
“This is a painful time for our nation,” Wells Fargo CEO Charlie Scharf said at the time. “As a white man, as much as I can try to understand what others are feeling, I know that I cannot really appreciate and understand what people of color experience and the impacts of discriminatory behavior others must live with.”