New Rules, Proposed Rules, Guidance and Alerts -

PROPOSED RULES -

SEC Proposes Amendments to Auditor Independence Rules -

On December 30, 2019, the SEC proposed amendments to Rule 2-01 of Regulation S-X, which sets forth the qualifications and independence standards for public company auditors, in order to carve out certain fact patterns identified by the SEC staff over the years since the initial adoption of the auditor independence framework in 2000 that are deemed less likely to threaten an auditor’s objectivity and impartiality.

If adopted, the proposal would amend the auditor independence rules to, among other things:

• limit the range of audit client affiliates from which an auditor must maintain its independence (1) by amending the definition of “affiliate of the audit client” to carve out affiliates under common control with the client (i.e., sister entities) that are not material to the controlling entity and, (2) with respect to the audit of an investment company (which would include a registered investment company, business development company and certain private funds), investment adviser or sponsor, by providing that the auditor and audit client would look solely to the definition of “investment company complex” to identify audit client affiliates and by amending the definition of “investment company complex” to, among other things, carve out affiliates under common control that are not material to the controlling entity;