CFTC Issues Interpretative Guidance Regarding Auditor Independence (CFTC Letter 14-40) (with Lofchie Comment)

The CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") issued an interpretative guidance letter regarding the auditor independence requirements under CFTC Rule 1.16 ("Qualifications and Reports of Accountants") for certified public accountants conducting examinations of futures commission merchants ("FCMs").

In the letter, the CFTC states that the revised Rule 1.16 requires, 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"). In revising Rule 1.16, the CFTC sought to harmonize FCM audit requirements with the audit requirements for broker-dealers registered with the SEC and thus subject to Exchange Act Rule 17a-5 ("Reports to Be Made by Certain Brokers and Dealers"). Furthermore, the CFTC stated its view that if a public accountant of an FCM complies with the Rule 17a-5 auditor independence requirements applicable to broker-dealers, it would have also complied with the CFTC's auditor independence Rule 1.16.

Lofchie Comment: It is a step forward when regulators conform their rules, or (if not expressly conform) at least confirm that one regulator's rule may be satisfied by compliance with the comparable rule of another comparable regulator.

See: CFTC Letter 14-40.