Specifically, the amendments affect Rule 2-01(c)(1)(ii)(A) of Regulation S-X (which is the Loan Provision), which generally provides that an auditor is not considered independent if that auditor is in a lending relationship with its audit client. The changes will focus on beneficial ownership rather than on both record and beneficial ownership. The ten percent bright-line shareholder ownership test will be replaced by a significant influence test, and a known through reasonable inquiry standard with respect to identifying beneficial owners of the audit client’s equity securities will be added. Also, the definition of audit client will be modified to exclude, for a fund under audit, any other funds that otherwise would be considered affiliates of the audit client under the rules for certain lending relationships.

These amendments will become effective 90 days after publication in the Federal Register.

Sources:

SEC Adopts Amendments to Improve the Application of the Auditor Independence Rules to Loan Provision (www.sec.gov)
Auditor Independence With Respect to Certain Loans or Debtor-Creditor Relationships (www.sec.gov)