Section 210.2–01 is designed to ensure that auditors are qualified and independent of their audit clients both in fact and in appearance. Accordingly, the rule sets forth restrictions on financial, employment, and business relationships between an accountant and an audit client and restrictions on an accountant providing certain non-audit services to an audit client. Section 210.2–01(b) sets forth the general standard of auditor independence. Paragraphs (c)(1) to (c)(5) of this section reflect the application of the general standard to particular circumstances. The rule does not purport to, and the Commission could not, consider all circumstances that raise independence concerns, and these are subject to the general standard in §210.2–01(b). In considering this standard, the Commission looks in the first instance to whether a relationship or the provision of a service: Creates a mutual or conflicting interest between the

and we do not expect a significant learning curve in applying the test for auditors and registrants. Therefore, the positive pair factors of 210 are (1, 210), (2, 105), (3, 70), (5, 42), (6, 35), (7, 30), (10, 21) and (14, 15). Under the current rule, the term “audit and professional engagement period” is defined differently for domestic issuers and foreign private issuers (“FPIs”) [ 30] The proposed amendments are likely to benefit investors indirectly. First, the potentially expanded auditor choices under the proposed amendment might improve audit quality through better matching between auditor expertise and audit engagement, thus potentially enhancing financial reporting quality. [ 80] In arriving at the proposed amendments, we considered the different characteristics associated with student loans, such as whether the student loan was obtained specifically for accounting and auditing education, obtained by the covered persons when they were pursuing their undergraduate education, or obtained by the covered persons for their immediate family members.

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i) Would the proposed amendment result in more or fewer instances of business relationships that are prohibited by Rule 2–01(c)(3)? Does the concept of beneficial owners with significant influence, as proposed, more appropriately identify relationships that are likely to impair an auditor's objectivity and impartiality than the current rule? We believe that the proposed amendments likely would improve the practical application of Rule 2–01, enhance efficiency of rule implementation, reduce compliance burdens, and increase competition among auditors. They also may facilitate capital formation. we do not expect a significant learning curve in applying the test or significant incremental compliance costs for auditors. With respect to IPOs, we preliminarily believe the proposed amendments discussed in Section II.A.2 could significantly mitigate the challenges associated with these transactions because only one year of previous compliance with Rule 2–01 would be required. In an IPO, the auditor generally has an existing auditor-client relationship with the audit client and the IPO is generally contemplated well in advance of its consummation. As a result, focusing the independence analysis on the most recent preceding fiscal year should significantly mitigate the challenges associated with consummating an IPO under our rules.

the improved financial reporting quality under the proposed amendments also would benefit audit clients as the higher quality of financial reporting could potentially reduce information asymmetry between auditors and their investors, improve firms' liquidity and decrease cost of capital. [ 74] At no additional expense, the service provides a secure, modifiable URL that you can use to engage with audio and video content, along with other work files, on your Internet-enabled device.Duc Dang, Senior Special Counsel, or Giles T. Cohen, Acting Chief Counsel, Office of the Chief Accountant, at (202) 551–5300; Alexis Cunningham, Assistant Chief Accountant, or Daniel Rooney, Assistant Chief Accountant, Chief Accountant's Office, Division of Investment Management, at (202) 551–6918; or Joel Cavanaugh, Senior Counsel, Investment Company Regulation Office, Division of Investment Management, at (202) 551–6792, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. End Further Info End Preamble Start Supplemental Information SUPPLEMENTARY INFORMATION: Should certain prohibited services and relationships continue to be an independence violation regardless of the transition framework such as if the PFC – Power factor correction technology ensures efficiency of the machine to offer a 30% energy saving