Insight
On October 16, 2020, the SEC adopted amendments to the auditor independence requirements in Rule 2-01 of SEC Regulation S-X. In the press release announcing the amendments, the SEC noted that the rule changes were “[i]nformed by decades of staff experience applying the auditor independence framework,” and will “more effectively focus…on relationships and services that may pose threats to an auditor’s objectivity and impartiality.”
The amendments will, among other things:
- Amend the definition of “affiliate of the audit client” to address certain affiliate relationships, including entities under common control (such as portfolio companies of private equity investors);
- Shorten the look-back period for domestic first-time filers;
- add certain student loans and de minimis consumer loans to exclusions from independence-impairing lending relationships; and
- Replace the reference to “substantial stockholders” in the business relationship rule with the concept of “beneficial owners with significant influence.”
The new rules will be effective 180 days after publication in the Federal Register, with early compliance permitted, subject to some exceptions.
Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.
