SEC Proposes Amendments to Auditor Independence Rules to Address Certain Lending Relationships -

Summary -

On May 2, 2018, the SEC issued proposed amendments to its auditor independence rules concerning the independence of an audit firm that has a lending relationship with certain shareholders of an audit client. The proposed amendments seek to address the significant compliance challenges presented by the application of the so-called “Loan Provision” in the mutual fund context and certain circumstances in which, as a practical matter, an auditor’s objectivity and impartiality are not impaired despite technical non-compliance with the Loan Provision. Currently, the Loan Provision generally provides that an audit firm is not independent if one of its lenders has record or beneficial ownership of more than 10% of the voting securities of a fund audit client.