6708 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices 

14 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 7217(b). 

2 15 U.S.C. 78s(b). 

3See Qualifications of Accountants, Release No. 

33–10876 (Oct. 16, 2020) (‘‘2020 Adopting 

Release’’). 

4See Amendments to PCAOB Interim 

Independence Standards and Board Rules to Align 

with Amendments to Rule 2–01of Regulation S–X, 

PCAOB Release No. 2020–03 (Nov. 19, 2020) 

(‘‘PCAOB Adopting Release’’), available at https:// 

pcaobus.org/Rulemaking/Docket047/2020-003- 

Independence-final-rule.pdf. 

5See Public Company Accounting Oversight 

Board; Notice of Filing of Proposed Rules on 

Amendments to PCAOB Interim Independence 

Standards and PCAOB Rules to Align with 

Amendments to Rule 2–01 of Regulation S–X, 

Release No. 34–90473 (Nov. 20, 2020) [85 FR 76131 

(Nov. 27, 2020)]. 

6See, e.g., comment letters from the Council of 

Institutional Investors, December 3, 2020 (‘‘CII 

Letter’’); Right Advisory LLC, December 7, 2020 

(‘‘RA Letter’’); Deloitte LLP, December 11, 2020 

(‘‘Deloitte Letter’’); PricewaterhouseCoopers LLP, 

December 16, 2020 (‘‘PwC Letter’’); Colorado PERA, 

December 16, 2020 (‘‘COPERA’’); International 

Corporate Governance Network, December 16, 2020 

(‘‘ICGN Letter’’); Consumer Federation of America 

and Certain Other Groups and Individuals, 

December 17, 2020 (‘‘CFA, et al. Letter’’); Ernst & 

Young LLP, December 18, 2020 (‘‘EY Letter’’); and 

the California Public Employees’ Retirement 

System, December 18, 2020 (‘‘CalPERS Letter’’). 

Copies of the comment letters received on the 

Commission order noticing the Proposed Rules are 

available on the Commission’s website at https://

www.sec.gov/comments/pcaob-2020-01/ 

pcaob202001.htm. 

7See supra note 4. 

8See 2020 Adopting Release at 81. 

9The term ‘‘emerging growth company’’ is 

defined in Section 3(a)(80) of the Exchange Act (15 

U.S.C. 78c(a)(80)). See also Release No. 33–10332 

Inflation Adjustments and Other Technical 

Amendments Under Titles I and III of the JOBS Act 

(Mar. 31, 2017), 82 FR 17545 (Apr. 12, 2017). 

10See RA Letter; Deloitte Letter; PwC Letter; and 

EY Letter. 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CBOE–2021–002 and 

should be submitted on or before 

February 12, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–01285 Filed 1–21–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90930; File No. PCAOB– 

2020–01] 

Public Company Accounting Oversight 

Board; Order Granting Approval of 

Amendments to PCAOB Interim 

Independence Standards and PCAOB 

Rules to Align with Amendments to 

Rule 2–01 of Regulation S–X 

January 14, 2021. 

I. Introduction 

On November 20, 2020, the Public 

Company Accounting Oversight Board 

(the ‘‘Board’’ or the ‘‘PCAOB’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’), 

pursuant to Section 107(b) 1 of the 

Sarbanes-Oxley Act of 2002 (the 

‘‘Sarbanes-Oxley Act’’) and Section 

19(b) 2 of the Securities Exchange Act of 

1934 (the ‘‘Exchange Act’’), a proposal 

to adopt amendments to the PCAOB’s 

interim independence standards and 

PCAOB rules to align with the 

Commission’s recent adoption of 

amendments 17 CFR 210.2–01 (‘‘Rule 2– 

01’’) of 17 CFR 210.01 et seq. 

(‘‘Regulation S–X’’) 3 (collectively, the 

‘‘Proposed Rules’’).4 The Proposed 

Rules were published for comment in 

the Federal Register on November 27, 

2020.5 We received several comment 

letters in response to the notice.6 This 

order approves the Proposed Rules, 

which we find to be consistent with the 

requirements of the Sarbanes-Oxley Act 

and the securities laws and necessary or 

appropriate in the public interest or for 

the protection of investors. 

II. Description of the Proposed Rules 

On November 19, 2020, the Board 

adopted amendments to the PCAOB’s 

interim independence standards and 

PCAOB rules to align with amendments 

by the SEC to Rule 2–01 of Regulation 

S–X.7 The Proposed Rules are intended 

to avoid differences and duplicative 

requirements. To that end, the Board 

adopted targeted amendments to its 

interim independence standards 

applicable to lending arrangements 

between auditors and audit clients. In 

addition, the Board adopted targeted 

amendments to align certain terms 

defined in PCAOB Rule 3501 with the 

Commission’s recent amendments to its 

definitions of those terms in 17 CFR 

210.2–01(f) (‘‘Rule 2–01(f)’’). 

A. Changes to PCAOB Standards 

The Proposed Rules will make the 

following changes: 

• Amend ET § 101.02 of the American 

Institute of Certified Public Accountants 

(‘‘AICPA’’) Code of Professional 

Conduct, Interpretation of Rule 101, as 

in existence on April 16, 2003 and 

incorporated in the Board’s auditing and 

related professional practice. 

• Delete ET § 101.07 of the AICPA’s 

Code of Professional Conduct, Loans 

from financial institution clients and 

related terminology, as in existence on 

April 16, 2003 and incorporated in the 

Board’s auditing and related 

professional practice standards by 

PCAOB Rule 3500T. 

• Delete ET §§ 191.150–.151, ET 

§§ 191.182–.183, ET §§ 191.196–.197, 

and ET §§ 191.220–.222, of the AICPA’s 

Code of Professional Conduct, as in 

existence on April 16, 2003 and 

incorporated in the Board’s auditing and 

related professional practice standards 

by PCAOB Rule 3500T, which are four 

Ethics Rulings under Rule 101 that also 

address lending arrangements and are 

part of the Board’s interim 

independence standards. 

• Amend PCAOB Rules 3501(a)(ii), 

(a)(iii), and (i)(ii). 

B. Applicability and Effective Date 

The Proposed Rules will be effective 

June 9, 2021, 180 days after the date of 

the publication of the Commission’s 

October 16, 2020 amendments to Rule 

2–01 in the Federal Register. The June 

9, 2021 effective date is aligned with the 

effective date of the Commission’s 

amendments to Rule 2–01.8 Auditors 

may elect to comply before the effective 

date at any point after SEC approval of 

the Board’s amendments, provided that 

the final amendments are applied in 

their entirety. The PCAOB has 

recommended that the Proposed Rules 

to apply to audits of emerging growth 

companies (‘‘EGCs’’),9 as discussed in 

Section IV below, and audits of brokers 

and dealers under 17 CFR 240.17a–5 

(‘‘Exchange Act Rule 17a–5’’). 

III. Comment Letters 

The comment period on the Proposed 

Rules ended on December 18, 2020. We 

received several comment letters 

representing investor organizations, 

advisory firms, accounting firms, trade 

organizations, and other interested 

parties. Some commenters were 

supportive 10 of the Proposed Rules 


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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices 6709 

11See RA Letter. 

12See CII Letter; CFA, et al. Letter. 

13See Section 107(b)(3) of the Sarbanes-Oxley 

Act. The Sarbanes-Oxley Act also specifies that the 

provisions of Section 19(b) of the Exchange Act 

shall govern the proposed rules of the Board. See 

Section 107(b)(4) of the Sarbanes-Oxley Act. 

Section 19 of the Exchange Act pertains to the 

registration, responsibilities, and oversight of selfregulatory organizations. Under the procedures 

prescribed by the Sarbanes-Oxley Act and Section 

19(b)(2) of the Exchange Act, the Commission must 

either approve or disapprove, or institute 

proceedings to determine whether the proposed 

rules of the Board should be disapproved; and these 

procedures do not expressly permit the Commission 

to amend or supplement the proposed rules of the 

Board. 

14See Deloitte Letter; PwC Letter; EY Letter; RA 

Letter. 

15See CII Letter; CFA et al. Letter; and CalPERS 

Letter. 

16See CFA et al. Letter. 

17See supra note 15. 

18 In considering a rule adopted by the PCAOB 

under the Sarbanes-Oxley Act, the Commission may 

only take action to approve or disapprove any such 

rule. As such, any recommendation to alter the 

Proposed Rules is outside the scope of this Order. 

19See supra note 11. 

20See supra note 18. 

21See CFA et al Letter, COPERA Letter; ICGN 

Letter; and CalPERS Letter. One commenter 

specifically expressed concerns regarding the 

PCAOB relying on the Commission’s deliberation in 

adopting the 2020 Adopting Release. See CalPERS 

Letter. In the PCAOB Adopting Release, the Board 

noted its consideration of the Commission’s 

rulemaking record and stated that ‘‘[it] believes that 

this process—structured by the Commission to 

satisfy the requirements of the Administrative 

Procedure Act—is at least as robust as the Board’s 

process would have been had the PCAOB 

considered amendments to the Board’s 

independence requirements without the benefit of 

the SEC’s analysis.’’ See PCAOB Adopting Release, 

at 12. The Board further noted that it did not 

perceive ‘‘any reason or compelling basis in the 

[Commission’s] rulemaking record’’ to diverge from 

the Commission’s stated goals and maintain 

disparate independence requirements. Id. Because 

we agree with the Board’s conclusions on these 

points, we are not persuaded by the commenter 

who objected to the PCAOB’s processes. 

22See Adopting Release, at 88–90. 

23See Release No. 33–10648 (June 18, 2019), [84 

FR 32040 (July 5, 2019)]. Some commenters 

explicitly cited to their prior comment letters 

submitted when the Commission considered the 

2020 Adopting release and the 2019 Adopting 

Release. See CII Letter, Deloitte Letter, PwC Letter, 

and Consumer Federation of America, et al. Letter. 

24See PCAOB Adopting Release at 27. 

while other commenters asked the 

Commission to consider certain changes 

to auditor independence unrelated to 

the Proposed Rules 11 or reiterated 

comments addressed by the 

Commission in the 2020 Adopting 

Release.12

The Sarbanes-Oxley Act requires us to 

determine whether the Proposed Rules 

are consistent with the requirements of 

the Sarbanes-Oxley Act and the 

securities laws, or are necessary or 

appropriate in the public interest or for 

the protection of investors.13 In making 

this determination, we have considered 

the comments we received. The 

comments received on the Proposed 

Rules did not raise new issues for the 

Commission to address. The 

commenters in support of the 

Commission’s approval of the Proposed 

Rules reiterated their prior support for 

the 2020 Adopting Release and noted 

the benefits of eliminating differences 

between the Commission’s and the 

PCAOB’s auditor independence rules 

while focusing on those relationships 

and services that are more likely to 

threaten an auditor’s objectivity and 

impartiality.14 Commenters opposing 

the Commission’s approval of the 

Proposed Rules reiterated certain 

concerns regarding amendments in the 

Commission’s 2020 Adopting Release or 

expressed concerns about the PCAOB’s 

process to adopt the Proposed Rules at 

this time. For example, some 

commenters 15 expressed concerns 

about the ‘‘Affiliate of the Audit Client’’ 

definition while one commenter 16

broadly opposed many of the specific 

amendments within the Commission’s 

2020 Adopting Release. Some 

commenters 17 also expressed the desire 

for a rule that would specify the 

documentation that auditors should 

prepare and maintain when additional 

services are provided to an affiliate of an 

audit client.18 One commenter 19

suggested a public certification of the 

design and operating effectiveness of 

controls over audit quality and 

independence by executives of the audit 

firm.20 The commenters 21 who 

expressed concerns about the PCAOB’s 

process to adopt the Proposed Rules at 

this time requested the PCAOB to use its 

independent authority to expand the 

scope of the rulemaking beyond 

conforming amendments to the 

Commission’s 2019 and 2020 Adopting 

Releases. 

After considering the public 

comments and recommendations, we 

are approving the Proposed Rules. The 

comments the Commission has received 

with respect to the Proposed Rules are 

generally similar to the comments the 

Commission considered when 

approving the 2020 Adopting Release 

and the Auditor Independence with 

Respect to Certain Loans or DebtorCreditor Relationships Release (the 

‘‘2019 Adopting Release’’).22 As the 

Commission noted in the 2020 Adopting 

Release, the Commission expects the 

amendments to Rule 2–01 to more 

effectively focus the independence 

analysis on those relationships or 

services that are more likely to pose 

threats to an auditor’s objectivity and 

impartiality. After considering public 

comments, the Commission noted that 

the amendments to Rule 2–01 would 

benefit audit firms, audit clients, and 

investors in several ways. First, by 

revising the rules to emphasize those 

relationships and services that are more 

likely to threaten auditor objectivity and 

impartiality, the Commission 

anticipates the amendments will reduce 

compliance costs for audit firms and 

their clients. Similarly, under the 

amended rules, auditors and their 

clients will be able to focus their 

resources and attention on monitoring 

those relationships and services that 

pose the greatest risk to auditor 

independence, reducing overall 

compliance burdens without 

significantly diminishing investor 

protections. 23 The Proposed Rules, 

which conform the PCAOB’s 

independence requirements to the 2020 

Adopting Release, will allow firms, 

audit clients and investors to take 

advantage fully of the anticipated 

benefits of the amendments to Rule 2– 

01. 

IV. Effect on Emerging Growth 

Companies 

In the PCAOB Adopting Release, the 

Board recommended that the 

Commission determine that the 

Proposed Rules apply to audits of 

EGCs.24 Section 103(a)(3)(C) of the 

Sarbanes-Oxley Act, as amended by 

Section 104 of the Jumpstart Our 

Business Startups Act of 2012, requires 

that any rules of the Board ‘‘requiring 

mandatory audit firm rotation or a 

supplement to the auditor’s report in 

which the auditor would be required to 

provide additional information about 

the audit and the financial statements of 

the issuer (auditor discussion and 

analysis) shall not apply to an audit of 

an [EGC].’’ The provisions of the 

Proposed Rules do not fall into these 

categories. 

Section 103(a)(3)(C) further provides 

that ‘‘[a]ny additional rules’’ adopted by 

the PCAOB after April 5, 2012, do not 

apply to audits of EGCs ‘‘unless the 

Commission determines that the 

application of such additional 

requirements is necessary or appropriate 

in the public interest, after considering 

the protection of investors and whether 

the action will promote efficiency, 

competition, and capital formation.’’ 

The Proposed Rules fall within this 

category. Having considered those 

statutory factors, we find that applying 

the Proposed Rules to the audits of 

EGCs is necessary or appropriate in the 

public interest. 

To inform consideration of the 

application of auditing standards to 

audits of EGCs, the PCAOB staff 


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6710 Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Notices 

25See Characteristics of Emerging Growth 

Companies and their Audit Firms as of November 

15, 2019 (November 9, 2020), available at https:// 

archive.pcaobus.org/EconomicAndRiskAnalysis/ 

ProjectsOther/Documents/White-PaperCharacteristics-Emerging-Growth-CompaniesNovember-15-2019.pdf. 

26See EGC White Paper at 13. 

27See PCAOB Adopting Release at 27. 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 90536 

(November 30, 2020), 85 FR 78381. 

4 15 U.S.C. 78s(b)(2). 

5 Id. 

6 17 CFR 200.30–3(a)(31). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

published a white paper that provides 

general information about 

characteristics of EGCs (‘‘EGC White 

Paper’’).25 In the EGC White Paper, the 

PCAOB staff stated that 

‘‘[a]pproximately 96% of EGC filers 

were audited by accounting firms that 

also audit issuers that are not EGC 

filers.’’ 26 Additionally, the PCAOB 

Adopting Release discussed the 

Commission’s intent to improve the 

practical application of Rule 2–01 of 

Regulation S–X and reduce compliance 

burdens, which may lead to increased 

competition among auditors and 

facilitate capital formation. The Board 

noted that if the Proposed Rules were 

determined not to apply to the audits of 

EGCs, auditors would be required to 

address the differing independence 

requirements in their independence 

policies and procedures and in their 

quality control systems as a result of the 

differences between the Board and 

Commission requirements, which 

would create the potential for 

confusion.27

We agree with the Board’s analysis. 

We believe the Proposed Rules will 

benefit EGCs at least as much as nonEGCs, in part, because the Commission’s 

amendments to Rule 2–01 were meant 

to more effectively focus the 

independence analysis on those 

relationships or services that are more 

likely to pose threats to an auditor’s 

objectivity and impartiality. 

As such, after considering the 

protection of investors and whether the 

action will promote efficiency, 

competition, and capital formation, we 

believe there is a sufficient basis to 

determine that applying the Proposed 

Rules to the audits of EGCs is necessary 

or appropriate in the public interest. 

V. Conclusion 

The Commission has carefully 

reviewed and considered the Proposed 

Rules, the information submitted 

therewith by the PCAOB and the 

comment letters received. In connection 

with the PCAOB’s filing and the 

Commission’s review, 

A. The Commission finds that the 

Proposed Rules are consistent with the 

requirements of the Sarbanes-Oxley Act 

and the securities laws and are 

necessary or appropriate in the public 

interest or for the protection of 

investors; and 

B. Separately, the Commission finds 

that the application of the Proposed 

Rules to the audits of EGCs is necessary 

or appropriate in the public interest, 

after considering the protection of 

investors and whether the action will 

promote efficiency, competition, and 

capital formation. 

It is therefore ordered, pursuant to 

Section 107 of the Sarbanes-Oxley Act 

and Section 19(b)(2) of the Exchange 

Act, that the Proposed Rules (File 

No.PCAOB–2020–01) be and hereby are 

approved. 

By the Commission. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2021–01311 Filed 1–21–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90926; File No. SR–CBOE– 

2020–106] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Designation 

of a Longer Period for Commission 

Action on a Proposed Rule Change, as 

Modified by Amendment No. 1, To 

Amend Its Rules Regarding the 

Minimum Increments for Electronic 

Bids and Offers and Exercise Prices of 

Certain FLEX Options and Clarify in 

the Rules How the System Ranks FLEX 

Option Bids and Offers for Allocation 

Purposes 

January 14, 2021. 

On November 16, 2020, Cboe 

Exchange, Inc. filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend its rules regarding the minimum 

increments for electronic bids and offers 

and exercise prices of certain FLEX 

options and clarify how the system 

ranks FLEX option bids and offers for 

allocation purposes. On November 30, 

2020, the Exchange filed Amendment 

No. 1 to the proposed rule change, 

which amended and replaced the 

proposed rule change in its entirety. The 

Commission published notice of the 

proposed rule change, as modified by 

Amendment No. 1, in the Federal 

Register on December 4, 2020.3 The 

Commission has received no comments 

on the proposal. 

Section 19(b)(2) of the Act 4 provides 

that, within 45 days of the publication 

of notice of the filing of a proposed rule 

change, or within such longer period up 

to 90 days as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or as to which the 

self-regulatory organization consents, 

the Commission shall either approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved. The 45th day after 

publication of the notice for this 

proposed rule change is January 18, 

2021. The Commission is extending this 

45-day time period. 

The Commission finds that it is 

appropriate to designate a longer period 

within which to take action on the 

proposed rule change so that it has 

sufficient time to consider the proposed 

rule change. Accordingly, the 

Commission, pursuant to Section 

19(b)(2) of the Act,5 designates March 4, 

2021, as the date by which the 

Commission shall either approve or 

disapprove or institute proceedings to 

determine whether to disapprove the 

proposed rule change, as modified by 

Amendment No. 1 (File Number SR– 

CBOE–2020–106). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–01282 Filed 1–21–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90919; File No. SR– 

CboeBZX–2021–002] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend the 

Fees Applicable to the BZX Top Feed 

January 14, 2021 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on January 4, 

2021, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) filed with the 


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