NYSE Proposes One-Year Internal Audit Transition Period for IPO Companies and Other New Registrants | Practical Law

NYSE Proposes One-Year Internal Audit Transition Period for IPO Companies and Other New Registrants | Practical Law

The NYSE issued a proposed rule change that would amend Section 303A.00 of its Listed Company Manual to provide a one-year transition period for companies listing in connection with an IPO and other new registrants to comply with the internal audit requirement of Section 303A.07(c). Update: This proposed rule change has been withdrawn from consideration by the NYSE. The NYSE is planning on filing a revised proposed rule change with the SEC at a later date.

NYSE Proposes One-Year Internal Audit Transition Period for IPO Companies and Other New Registrants

by PLC Corporate & Securities
Published on 26 Apr 2012 • USA (National/Federal)
The NYSE issued a proposed rule change that would amend Section 303A.00 of its Listed Company Manual to provide a one-year transition period for companies listing in connection with an IPO and other new registrants to comply with the internal audit requirement of Section 303A.07(c). Update: This proposed rule change has been withdrawn from consideration by the NYSE. The NYSE is planning on filing a revised proposed rule change with the SEC at a later date.
On April 25, 2012, the NYSE filed a proposed rule change that would amend Section 303A.00 of its Listed Company Manual to provide a one-year transition period for the NYSE's internal audit requirement of Section 303A.07(c) for companies that are:
  • Listing in connection with an IPO (including by carve-out).
  • New registrants (including by spin-off).
Update: This proposed rule change has been withdrawn from consideration by the NYSE. The NYSE is planning on filing a revised proposed rule change with the SEC at a later date.
Section 303A.07(c) requires listed companies to have an internal audit function. The internal audit function should provide management and the audit committee with ongoing assessments of the company's risk management processes and system of internal controls.
Under the current Section 303A.00, companies listing with the NYSE after transferring from another national securities exchange (such as NASDAQ) have a one-year transition period to comply with the internal audit requirement. The proposed rule change would extend the same transition period to other newly listing companies.
The NYSE noted that newly listed companies typically appoint a completely new audit committee. A one-year transition period would give the new committee an opportunity to familiarize itself with the internal controls and risk management of the company and determine what kind of internal audit function is suitable for the company given its specific circumstances.
For more information on NYSE corporate governance standards, see Comparative Corporate Governance Standards Chart: NYSE vs. NASDAQ.