A. PCAOB Proposed Framework for Reorganization of PCAOB Auditing Standards
On March 26, 2013, the Public Company Accounting Oversight Board (PCAOB) issued Release No. 2013-002 proposing a framework for reorganizing the existing interim and PCAOB-issued auditing standards into a topical structure with a single integrated numbering system. The proposed reorganization would involve reordering and renumbering existing standards in their entirety, without redrafting the auditing standards or making substantive changes to the requirements of the standards. The proposed reorganization is intended to present the standards, issued in Rule 3200T in April 2003, in a logical order that generally follows the flow of the audit process. The changes to PCAOB auditing standards resulting from the proposed reorganization are not expected to impose new requirements on auditors or substantively change the requirements of PCAOB standards. The PCAOB seeks comment on its proposed framework for reorganizing the auditing standards. After the Board considers comments on this proposal, the Board intends to release and seek comment on all of the amendments necessary to implement the reorganization of the auditing standards. The Board will continue to review and consider changes to individual standards in separate standard-setting projects.
B. SEC Proposes Rules to Improve Systems Compliance and Integrity
On March 7, 2013, the SEC unanimously proposed new rules to require certain key market participants to have comprehensive policies and procedures in place surrounding their technological systems. The proposal, called Regulation SCI, would replace the current voluntary compliance program with enforceable rules designed to better insulate the markets from vulnerabilities posed by systems technology issues.
C. Division of Trading and Markets Issues Rule 15a-6 FAQs
The Division of Trading & Markets published a set of Frequently Asked Questions addressing issues under Exchange Act Rule 15a-6, which provides “conditional exemptions from broker-dealer registration requirements for foreign broker-dealers that engage in certain activities involving U.S. investors.” Some of the topics highlighted include the distribution of research by foreign broker-dealers to U.S. institutional investors, the application of the Nine Firms Letters to foreign broker-dealers not affiliated with a registered broker-dealer, and recordkeeping obligations for a registered broker-dealer that has entered into a chaperoning agreement with a foreign broker-dealer under Rule 15a-6.
D. Mary Jo White Nominated for Chair of the SEC
The Senate Banking Committee approved Mary Jo White’s nomination to be the 31st Chair of the SEC in a vote of 21 to 1. Her nomination will now proceed to the full Senate for consideration.
E. Proposed NASDAQ Rule Requires Internal Audit Function at Listed Companies
NASDAQ recently filed with the SEC a proposed rule requiring listed companies to establish and maintain an internal audit function. “The purpose of the rule is to ensure that listed companies have a mechanism in place to regularly review and assess their system of internal control and, thereby, to identify any weaknesses and develop appropriate remedial measures.” Under the proposed rule, “each Company must establish and maintain an internal audit function to provide management and the audit committee with ongoing assessments of the Company’s risk management processes and system of internal control.” The Company may choose to outsource this function to a third party provider. In addition, the audit committee (1) must meet periodically with the internal auditors and (2) discuss with the outside auditor the responsibilities, budget and staffing of the internal audit function.