Accounting firm Prager Metis violated auditor independence rules hundreds of times during a period of nearly three years, the Securities and Exchange Commission (SEC) charged.

The agency filed its lawsuit Friday in U.S. District Court for the Southern District of Florida. The complaint seeks a permanent injunction, disgorgement, and a penalty against Prager.

The details: Between December 2017 and October 2020, Prager included indemnification provisions in its engagement letters for more than 200 audits, reviews, and exams, which meant the firm was not independent from its clients as required by the SEC, the agency said in its complaint.

Prager was among firms called out in January by Sens. Elizabeth Warren (D-Mass.) and Ron Wyden (D-Ore.) for an alleged lack of independence when performing audits on behalf of cryptocurrency companies. The senators, who took their complaints to the Public Company Accounting Oversight Board (PCOAB), which is overseen by the SEC, noted Prager audited FTX and gave it a clean bill of health before it declared bankruptcy.

The PCAOB’s jurisdiction is limited to audit work related to publicly traded companies.

Compliance considerations: Prager’s senior partners were warned repeatedly by the PCAOB that including the indemnification provisions meant the firm was not independent, but it continued to include them in its client letters, the SEC said.

The firm did not disclose to its clients it violated independence requirements for auditors, the SEC said. The agency also alleged Prager aided and abetted some of its broker-dealer and investment adviser clients’ violations of federal securities laws, without naming specific firms.

“Auditor independence is critical to both protecting the integrity of financial reporting and promoting public trust,” Eric Bustillo, director of the SEC’s Miami regional office, said in a press release. “As alleged in our complaint, over a period of nearly three years, Prager’s audits, reviews, and exams fell short of these fundamental principles. Our complaint is an important reminder that auditor independence is crucial to investor protection.”

Firm response: “We strongly disagree with the SEC’s allegations because we always acted in a way that was independent of our clients,” Prager Metis said in an emailed statement. “These allegations arise solely from template indemnification language used several years ago that was never enforced or sought to be enforced, and the SEC does not allege this language affected the quality of our audits. Prager takes its independence obligations seriously and intends to vigorously defend itself in this litigation.”