From a wrist slap to jail time: how the SEC deals with dodgy accounting

What exactly does it take for a company to move from getting a slap on the wrist from the Securities and Exchange Committee for accounting issues to being slapped with criminal charges that could lead to jail time?

That’s a pertinent question, coming a week after the former head of real-estate investment company American Realty Capital Partners was charged with accounting fraud for using a metric that didn’t comply with Generally Accepted Accounting Principles and that inflated his company’s results.

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While criminal charges for accounting issues in quarterly earnings reports are relatively rare, companies can face enforcement actions for failing to follow SEC rules on earnings reports.

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