SEC Adopts Amendments to Auditor Independence Rules Regarding Loans

July 23, 2019

On June 18, 2019, the SEC adopted amendments to its auditor independence rules that change the analysis used to determine whether an auditor is independent when it has a lending relationship with certain shareholders of an audit client during an audit or professional engagement period. The amendments help to address compliance concerns of investment companies (among others) and accounting firms stemming from the application of the auditor independence standards to lending relationships in which the auditor’s objectivity and impartiality do not appear to be affected as a practical matter. Rule 2-01(c)(1)(ii)(A) of Regulation S-X currently provides in general that an accounting firm is not independent if the firm, any covered person in the firm or any of the covered person’s immediate family members have a loan to or from an audit client or the record or beneficial owners of more than 10% of the audit client’s equity securities. The amendments are effective on October 3, 2019.
Seward & Kissel has recently prepared a memorandum that discusses the amendments in greater detail. Click here


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Compliance, Investment Advisers, Investment Companies, Regulatory