The U.S. Securities and Exchange Commission (SEC) announced on Monday that public accounting firm Ernst & Young (E&Y) has agreed to pay US$9.3 million to settle charges that two of the firm’s audit partners got too close to their clients on a personal level and violated rules that ensure firms maintain their objectivity and impartiality during audits.

“These are the first SEC enforcement actions for auditor independence failures due to close personal relationships between auditors and client personnel,” adds Andrew Ceresney, director of the SEC’s division of enforcement. “Ernst & Young did not do enough to detect or prevent these partners from getting too close to their clients and compromising their roles as independent auditors.”

In the first instance, E&Y partner Gregory Bednar caused auditor independence rule violations by becoming too close with the CFO of an audit client, the SEC says. Bednar and the CFO travelled together socially, stayed overnight at each other’s homes, and exchanged hundreds of personal text messages, emails, and voicemails. Bednar also became friends with the CFO’s son and often treated them to sporting events and other gifts, the SEC adds.

“Certain Ernst & Young partners became aware of Bednar’s excessive entertainment spending but took no action to confirm that Bednar was complying with his independence obligations,” the regulator says.

In the second case, E&Y’s Pamela Hartford caused rule violations by having a romantic relationship with financial executive Robert Brehl while she served on the team auditing his company, the SEC says. Another E&Y partner, Michael Kamienski, became aware of the improper relationship yet failed to follow up, the regulator adds.

E&Y and the various partners consented to the SEC’s orders without admitting or denying their findings.

In the Bednar case, the firm agreed to pay US$4.975 million in monetary sanctions. Bednar must pay US$45,000 and is suspended from practicing before the SEC as an accountant for three years.

E&Y agreed to pay US$4.366 million in monetary sanctions in the Hartford case. Hartford and Brehl agreed to pay $25,000 each. Hartford and Kamienski are suspended for three years, while Brehl is suspended for one year.