September 21, 2016

Auditor Independence: SEC Settles 1st Violation Caused By Personal Relationships

Here’s the intro from this Cooley blog:

In two orders made public today, the SEC announced settled charges against EY and individual EY auditors with regard to alleged violations of the auditor independence rules as a result of “close personal relationships” with officers at audit clients. According to the press release, these “are the first SEC enforcement actions for auditor independence failures due to close personal relationships between auditors and client personnel.”

EY and the other auditors charged consented to the SEC’s order without admitting or denying the findings and paid penalties. EY was also censured,and the individuals were suspended from practice before the SEC. These cases are of interest to issuers as well as auditors because the auditors’ violations caused the companies involved to violate Section 13(a) of the Exchange Act and Rule 13a-1, which require public companies to file Forms 10-K with financial statements that have been audited by independent accountants.

Cybersecurity: New York Proposes 1st State Legal Framework

Here’s an excerpt from this Morgan Lewis article (we’re posting memos in our “Cybersecurity” Practice Area):

The New York Department of Financial Services (NYDFS) has proposed cybersecurity rules that would require banks, insurers, and other NYDFS-regulated financial services companies to adhere to stringent cybersecurity requirements mandating firms to test their systems, establish plans to respond to cybersecurity events, and annually certify compliance with the cybersecurity requirements, among other mandates. Comments on the proposed rules are due in 45 days.

Political Spending Disclosure: Fight Within Congress Continues

Here’s the intro from this WSJ article:

A political fight over whether to require companies to disclose their political spending activities is complicating congressional efforts to hammer out a stopgap spending measure by the end of the month, Republican and Democratic aides say. Senate Democrats are asking their Republican counterparts to drop language from a short-term spending measure to keep the government operating through the fall. The GOP provision would prevent the Securities and Exchange Commission from working on a rule that would require publicly traded companies to disclose political contributions.

The government’s current funding, which expires next week, already bars the SEC from using its funding to “finalize, issue or implement” a political-spending disclosure rule. And Democrats face a high hurdle in getting that provision eliminated, since language from existing funding plans typically carry over into any new short-term spending bills.

Broc Romanek