SEC Staff Throws Funds A Lifeline On Auditor Independence (For Now)

The SEC's Division of Investment Management provided temporary relief from the headache created for funds when the failure to meet the provisions of the so-called "loan rule" may disqualify fund auditors from being independent.

In a no-action letter issued to Fidelity Management and Research, the staff said it would not recommend enforcement action if a fund's auditor fails to meet the independence requirements of Rule 2-01(b) of Regulation S-X because it has a lending relationship with an entity that owns (beneficially or of record) more than 10 percent of the fund's equity securities (the "loan rule").

But the relief is only temporary: the staff's no action position expires in 18 months.