Newsflash: SEC Staff Issues No-Action Relief on Auditor Independence and the “Loan Provision”

June 21, 2016

The U.S. Securities and Exchange Commission’s Division of Investment Management (the “SEC Staff”) last night issued a no-action letter (the “Relief”) to Fidelity Management and Research Company that provides guidance to registered investment companies and their investment advisers as they continue to evaluate the independence of their audit firms in light of recent uncertainty about the application of Rule 2-01(c)(1)(ii)(A) under Regulation S-X – the so-called “Loan Provision.”

The Relief indicates that the SEC Staff would not recommend enforcement action if a registered fund or other entity in the fund’s “investment company complex,” as that term is defined in Regulation S-X, continues to fulfill its regulatory requirements under the federal securities laws using audit services provided by an audit firm that has a relationship with lending financial institutions that cause the audit firm not to be in compliance with the Loan Provision in certain circumstances, subject to conditions intended to ensure that the audit firm remains objective and impartial.

Read "SEC Staff Issues No-Action Relief on Auditor Independence and the 'Loan Provision'."