Notice to Members 02-19

SEC Review of Auditor Independence Rules

During 2001, NASD Regulation conducted certain reviews that showed that an auditor's independence with respect to its broker/ dealer client was impaired. The staff required broker/dealers to restrict the nature of the services obtained from their accountant or employ a different and independent outside auditor. To provide background and guidance on auditor independence to our member firms, this Notice discusses the issues considered by the SEC and summarizes specific amendments we believe most relevant to NASD members. It also discusses the American Institute of Certified Public Accountants' (AICPA) current rules regarding certain auditor independence issues to highlight certain conclusions reached by the SEC. Finally, in this Notice, we focus on criteria that firms should consider in determining whether an auditor's independence may be impaired. The NASD Regulation staff will use the same criteria in determining whether an auditor's independence is impaired in any given situation.

Questions about this Notice may be directed to Andrew Labadie at (202) 728-8397 or Susan DeMando at (202) 728-8411, Member Regulation, NASD Regulation.