What does auditor independence mean? Ask SEC.

The U.S. Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight issued an interpretation March 28 regarding the auditor independence requirements under Regulation 1.16 for certified public accountants conducting examinations of futures commission merchants.

The Commission published on Nov. 14, 2013, new and amended regulations requiring FCMs holding customer funds to implement enhanced customer protections to include risk management programs; internal monitoring and controls; capital and liquidity standards; customer disclosures; and auditing and examination programs (the Customer Protection Rule). 

In the Customer Protection Rule, the Commission revised Regulation 1.16 to require, among other things, a certified public accountant’s audit report of an FCM to state whether the audit was conducted in accordance with the auditing standards adopted by the Public Company Accounting Oversight Board (PCAOB).  The Commission also stated that the amendments to Regulation 1.16 would harmonize FCM audit requirements with the audit requirements for broker-dealers (BDs) registered with the Securities Exchange Commission (SEC).

It is DSIO’s view that a public accountant of an FCM will comply with the Commission’s Regulation 1.16 auditor independence requirements if such public accountant complies with the SEC and PCAOB audit independence requirements applicable to BDs.

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