SEC offers relief for Hurricane Florence victims

The Securities and Exchange Commission announced a variety of regulatory relief and assistance for a range of constituents affected by Hurricane Florence, including allowing auditors to help clients reconstruct lost records.

Noting that company records may have been lost, damaged or destroyed by the hurricane, the commission said in its order that it understands that, “An audit client may look to its auditor for assistance in reconstruction of its accounting records because of the auditor’s knowledge of the client’s financial systems and records.”

To facilitate that, the SEC said that it would loosen certain independence requirements that would normally prohibit this kind of assistance.

For affected independent CPAs who are providing audit services to registrants, and for others who have to comply with independence requirements, the SEC is exempting them from the requirements of Section 10A(g)(1) of the Exchange Act of 1934, and of Rule 2-01(c)(4)(i) of Regulations S-X, provided that:

Their services are limited to reconstructing previously existing accounting records lost or destroyed by the hurricane, and those services “cease as soon as the audit client’s lost or destroyed records are reconstructed, its financial systems are fully operational and the client can effect an orderly and efficient transition to management or other service provider;” and,

The services are pre-approved by the client’s audit committee, per Rule 2-01(c)(7) of Regulation S-X.

A car stands partially submerged in floodwaters during Tropical Storm Florence near Beulaville, North Carolina.
A car stands partially submerged in floodwaters during Tropical Storm Florence near Beulaville, North Carolina, U.S., on Sunday, Sept. 16, 2018. Major poultry and meat companies are starting to resume operations in the Carolinas as the torrential rains and flooding unleashed by Hurricane Florence start to subside. Photographer: Callaghan O'Hare/Bloomberg

More broadly, the commission noted in its order that, “The loss of property, power, transportation, and mail delivery due to the hurricane poses challenges for some individuals and entities that are required to provide information to the SEC and shareholders,” and pushed back filing deadlines toward the end of October.

For eligible registrants and others affected by the hurricane, all reports, schedules or forms due between Sept. 14, 2018, and Oct. 26, 2018, will be due on or before Oct. 29, 2018.

All filings should include mention that they are relying on the SEC’s relief.

The relief also exempts some eligible registrants from providing proxy statements or transmitting annual and semi-annual reports, and lightens the burden on affected registered transfer agents, municipal advisors, and others.

More details are available in the commission’s order, as well as its interim final temporary rules.

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