SEC addresses securities transparency; PCAOB addresses audit concerns

The SEC recently adopted a series of rules and amendments aimed at strengthening transparency around securities in the capital market.

  • The SEC adopted Rule 13f-2 requiring institutional investment managers that reach certain thresholds in the equity markets to report certain short sale data on new Form SHO. The commission will aggregate the data and share it publicly on a delayed basis. A related amendment impacts the CAT (consolidated audit trail) and the reporting of short sales.
  • It also adopted Rule 10c-1a requiring the reporting of certain confidential information about securities loans to a registered national securities association (RNSA). Some of the information will be made available to the public. Currently, the Financial Industry Regulatory Authority (FINRA) is the nation’s lone RNSA.
  • Also, the SEC adopted rule amendments under Section 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934 that shorten the time that an investor who beneficially owns more than 5 percent of a covered class of equity securities has to publicly file either Schedule 13D or Schedule 13G.

PCAOB provides perspective on engagement quality reviews

The PCAOB, appointed by the SEC to regulate audits of public companies and SEC-registered brokers and dealers, recently released a staff report providing “good practices and reminders” for auditors related to engagement quality reviews (EQRs).

According to the report, 42% of firms inspected by the PCAOB in 2022 received quality control criticism related to the EQR process, which requires a reviewer who is not a part of the audit engagement team to evaluate significant judgements made by the engagement team.

“We urge audit firms and audit committees to read our EQR report so they can fully live up to their responsibility to protect investors against insufficiently supported audits,” PCAOB Chair Erica Y. Williams said in a news release.

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