Among the changes the SEC wants to make are:

  • Amending the definition of an affiliate of the audit client to address certain affiliate relationships in common control scenarios,

  • Shortening the look-back period for domestic first-time filers in assessing compliance with the independence requirements,

  • Adding certain student loans and de minimis consumer loans to the categorical exclusions from independence-impairing lending relationships,

  • Replacing the reference to “substantial stockholders” in the business relationship rule with the concept of beneficial owners with significant influence, and

  • Introducing a transition framework for merger and acquisition transactions.

SEC Chairman Jay Clayton said, “In practice, the proposed amendments also would increase the number of qualified audit firms an issuer could choose from and permit audit committees and Commission staff to better focus on relationships that could impair an auditor’s objectivity and impartiality.”

The SEC made changes to the “Loan Provision” of the independence rules in 2019, a move that was widely applauded as overdue, even by often-rival Democrats and Republicans on the House Financial Services Committee. And groups such as the American Investment Council asked for even broader changes to the independence rules, such as applying the more lenient interpretation of “affiliate of the audit client” to situations beyond loans. The SEC has now agreed to this request.

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