July 23, 2020
I have just recently become aware of the proposal to revise Rule 2.01 of Regulation S-X. From 1990 through 1996 I was the Assistant Chief Accountant in OCA whose primary area of responsibility was dealing with questions related to auditor independence. I recognize that the rules that were then in effect have been substantially modified, and I am aware of and supported many of those revisions.
I would hope to be a voice of staff experience in offering the members of the Commission the comments herein.
I was more than a little surprised to see several things in the Proposal. The "hypothetical scenario" described in the Release, states that "the SEC Staff (presumably the OCA staff) has conducted a number of consultations in which this fact pattern hs been raised."
I submit that this is the highly preferable way of dealing with issues such as those described in the proposal, and that seeking such consultation is preferable to seeing the Commission weakening/changing the Rules themselves to avoid consultation. Unless something has changed radically, the result of such consultations will have been a considered decision by OCA "not to object", and that this is, and has been for many years, the best way to posture the Commission. Opening the door to a weakened rule that will be used as a basis for avoiding consultation is neither appropriate nor in the best interests of preserving independence and protecting investors.
The OCA is, I'm sure, adequately staffed to handle such consultations. Its staff is nearly the triple of the level when I worked there. And the Commission is better served to have its experienced staffers (preferably permanent staffers and not just PAFs who come from and generally return to the firms) examine, discuss and resolve the questions.
For this reason, I would be strongly opposed to the proposal to weaken the existing rules in both of the areas described in the release.
(I do have to suggest that in my experience, I believe there are very likely VERY FEW individuals who advance to partnerships in accounting firms and still have outstanding student loans)