Update: The Shoemaker’s Children… The Big Four And Their Own Broker-Dealers

Did you know that each of the Big Four audit firms and some of the next tier also run SEC-registered broker-dealers? Although they don’t hold customer money, yet, they do count on the capital from their own partners to fund them. Given the poor record the auditors, all of them, have auditing broker-dealers, you’d imagine that the Big Four would take special care to make sure the audits of their own firms followed all the rules all the time and were of the highest quality, beyond reproach.

You’d be imagining wrong.

Update:  One of my loyal lawyer readers asked the salient question after skimming this summary.  “Why, Francine, would a public accounting firm own an SEC-registered broker-dealer?” Good question. (That’s why lawyers get paid the big bucks.)  I will let the firms explain the purpose of their broker-dealers using what they told the SEC:

PwC, whose unit is losing money:

PricewaterhouseCoopers Corporate Finance LLC the Company is registered with the Securities and Exchange Commission the SEC as broker-dealer and is member of the Financial Industry Regulatory Authority F1NRA The Company was organized as limited liability company under the laws of the state of Delaware As such its member liabilities in the Companys obligations and debts shall be limited to the amounts of their capital contributions.

The Company engages in the investment banking business by providing financial advisory services to institutional customers, advising and arranging capital sourcing, mergers and acquisitions. Its activities also include privately placing equity and debt securities on behalf of corporations partnerships business trusts and limited liability companies on best efforts basis with clients located throughout the United States.


Ernst Young Capital Advisors LLC is Limited Liability Company organized under the laws of the state of Delaware in November 2009 The Company is wholly owned by EYCA Holdings LLC which is wholly owned by Ernst Young U.S LLP EY The Companys operations consist primarily of corporate finance consulting and other advisory services in connection with bankruptcies, corporate debt restructuring activities, corporate restructuring transactions, mergers and acquisitions, the sale of corporate assets including the divestiture of subsidiaries, and other capital structure transactions.

The Company is registered broker-dealer with the Securities and Exchange Commission SEC and is member of the Financial Industry Regulatory Authority FINRA.


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I wrote at Medium.com about this strange irony,  “When Big Four Audit Firms Need An Audit They Choose Cheap”.

What’s worse than the auditors’ failures to prevent, detect and mitigate these frauds, failures and illegal activities at their clients is that the Big Four global audit firms choose the cheapest auditors or the least qualified — or both — to cover the regulatory requirement to file an audit opinion for their own broker-dealer units. In one case, the audit firm chosen by a Big Four firm was slow to comply with the requirement for PCAOB registration.

The Big Four choose cheap, unqualified firms to audit their own broker-dealers — firms funded with partners’ capital contributions. Why would the Big Four global audit firms force broker-dealer audit clients to do more and spend more to protect customers?

What is the SEC and PCAOB waiting for? Another MF Global or PFG Best to prove that this industry—broker-dealers and the auditors who are supposed to safeguard customers’ funds— needs a complete overhaul?