TheCorporateCounsel.net

As Liz noted last month, the SEC issued a notice of a proposed NYSE rule change that, if approved, would extend the transition period in which a listed company must establish an internal audit function from one year to five years. In support of the proposal, the NYSE notes that “[o]ver time, issuers have expressed concern that developing a capable internal audit function within the first year of listing presents challenges as issuers adjust to life as a newly public company.”

As a helpful public service, Professor Tzachi Zach at The Ohio State University Fisher College of Business has been developing AI-based comment trackers for various SEC rulemakings, and recently he (along with Professor Sarah McVay of the University of Washington) launched a tracker for the NYSE’s internal audit transition proposal, which categorizes the comment letters so that you can easily identify the number that oppose, support, or conditionally support the proposal. With respect to comment trends on the NYSE’s proposal, this Bloomberg article notes:

A plan to cut back internal audits of companies newly listed on the New York Stock Exchange has drawn overwhelming opposition in public comments, according to a new analysis.

Only one of the 128 comments filed as of Sept. 21 supported the idea, which would give newcomers five years to establish internal audit controls instead of just one year. The vast majority, 123 of the responses, were opposed, according to the analysis published Tuesday by Professor Tzachi Zach of The Ohio State University and Professor Sarah McVay of the University of Washington.

The vast majority of the comments on the NYSE’s proposal came from internal audit professionals opposing the NYSE’s plan to extend the transition period. The single comment letter submitted in support of the NYSE’s proposal noted that the internal audit function “has become an overwhelming ‘check the box’ exercise that has not added value to the organization.”

I applaud the effort to create and share these comments trackers, it is really a great way to get insight into the public response on these key rulemakings.

– Dave Lynn