John Braun

Recent Posts

The Next Evolution of Fair Value: The SEC’s Proposed Rule 2a-5

Posted by John Braun on May 28, 2020 12:53:45 PM

An Auditor’s Perspective for Boards of Directors/Trustees

In April, the SEC released proposed Rule 2a-5 under the Investment Company Act of 1940, which addresses valuation practices and the relative role of the Board for registered investment companies and business development companies. The proposal looks to be another “catch-up” by the SEC to account for the growing complexity of valuations and the evolution of developments that have taken place with respect to accounting and auditing regulations.

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Valuing Private Investments in Mutual Funds and Interval Funds

Posted by John Braun on Apr 24, 2020 6:31:00 PM

Many advisers of registered products, including mutual funds and closed-end interval funds, invest in private alternative investments as part of their portfolio strategy. And generally, they are permitted by the Investment Advisers Act of 1940 to do so. While mutual funds are restricted to investing up to 15% of net assets in illiquid securities, there are no such restrictions for interval funds.

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Fulcrum Fees: An Imperfect Solution For Active Managers?

Posted by John Braun on Mar 30, 2020 5:57:21 PM

Fulcrum fee arrangements have been used by certain actively traded registered funds for years but are of late garnering increased attention as active managers attempt to stave off passive investing and the lower fee structure often associated with it. The concept aligns the interest of the advisor with that of the investor by rewarding the advisor when it outperforms its benchmark and reducing the fees of the advisor (to that of an index fund-like fee or even zero) when it underperforms its benchmark.

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The SEC's Proposed Rule 2-01 Auditor Independence Updates: Do These Modifications Do The Trick?

Posted by John Braun on Feb 12, 2020 6:53:00 PM

On December 30, 2019, the SEC proposed amendments to certain independence requirements with the goal of further aligning the auditor’s independence analysis with Rule 2-01’s “reasonable investor” concept.  The concept asks us to consider whether a reasonable investor with knowledge of all the relevant facts and circumstances would conclude that the auditor is capable of exercising objective and impartial judgment?

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PCAOB Auditing Standard AS 2501- Auditing Accounting Estimates, Including Fair Value Measurements

Posted by John Braun on Nov 8, 2019 1:03:00 PM

The new standard (AS 2501), which is effective for fiscal years ending on or after December 15, 2020, replaces three existing standards relative to auditing accounting estimates. While this replacement implies that much of the content already existed, the PCAOB has adopted this standard because the use of complex accounting estimates and fair value measurements continues to grow. Their oversight activities have revealed a pattern of audit deficiencies in these areas of the audit that are also often some of those areas with the greatest audit risk.

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Investment Company Acquisitions: SEC Proposes Amendments to Financial Statement Disclosures

Posted by John Braun on May 16, 2019 11:28:07 AM

Currently, there are no specific rules or requirements for investment companies relating to the financial statements of acquired funds. Instead, investment companies apply the general SEC requirements of Rule 3-05 and the pro-forma financial information requirements in Article 11 requiring disclosure and information, which are not always relevant to investment companies.

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SEC Disclosure Update and Simplification Release

Posted by John Braun on Nov 16, 2018 3:15:31 PM

On August 17, 2018, the SEC adopted what effectively amounts to “housekeeping items” for a variety of public issuers. These updates are effective November 5, 2018. 

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PCAOB Provides Updates on Auditor Reporting

Posted by John Braun on Sep 7, 2018 4:03:56 PM

On August 23, 2018, the PCAOB provided supplemental information to PCAOB Release No. 2017-001, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards.

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New Revenue Recognition Standards and Impact on Asset Managers

Posted by John Braun on May 30, 2018 11:45:26 AM

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This standard clarifies the principles for recognizing revenue and offers a common revenue standard between U.S. GAAP and IFRS.

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Update: Independence and the "Loan Rule"

Posted by John Braun on Oct 2, 2017 11:00:00 AM

As detailed in a previous post, Regulation S-X Rule 2-01(c)(1)(ii)(A) (the "Loan Rule") prohibits accounting firms from having certain financial relationships with their audit clients and affiliated entities. 

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