A few weeks ago, the SEC published this notice for public comment over this NYSE proposal extending the transition period for newly listed companies to establish an internal audit department from one year to five years. Five years would give newly public companies more time to develop a meaningful program at a time when they are upgrading accounting systems and internal controls, adding personnel, and adapting their compliance infrastructure to public-company requirements.
The proposal would also narrow a potentially meaningful difference between the NYSE and Nasdaq for companies deciding where to list. The Nasdaq doesn’t require listed companies to maintain an internal audit function (although many of the larger companies do).
Even with the proposed five-year transition period, the NYSE requirement would remain more stringent than Nasdaq’s. Nevertheless, the substantially longer transition period could make an NYSE listing more attractive to companies for which the existing one-year deadline is a consideration in choosing between the exchanges.
Authored by
Broc Romanek