SEC amends the Loan Provision of its auditor independence rules
The SEC amended its auditor independence rules with respect to loans and debtor-creditor relationships (the Loan Provision). The SEC’s amendments refocus the analysis on debtor-creditor relationships that pose a threat to auditor independence.
Final rule: Release No. 33-10648; 34-86127
- SEC registered companies
- SEC registered investment companies
- SEC registered broker-dealers
- Private funds managed by SEC registered investment advisers
- Final rule issued: June 18, 2019
- Effective date: October 3, 2019
The key amendments to the Loan Provision:
- Focus the analysis only on beneficial ownership.
- Replace the existing 10% bright-line shareholder ownership test with a ‘significant influence’ test.
- Add a ‘known through reasonable inquiry’ standard with respect to identifying beneficial owners of the audit client’s equity securities.
- For a fund under audit, exclude from the definition of ‘audit client’, any other funds that otherwise would be considered affiliates of the audit client.
- Why is the SEC amending the Loan Provision?
- Amended Loan Provision
- Other comments
- Effective dates and transition