Generally, you are not permitted to invest in audit clients or their affiliates,
also referred to as restricted entities. However, in certain instances,
your immediate family members may be permitted to hold a restricted
investment through their employee benefit plan with their current
employer when certain criteria are met.
To determine if this exception applies, you must identify whether you are
a Covered Person for the restricted investment offered
through your immediate family member’s current employer’s benefit plan.
If you are not a Covered Person for the investment, your immediate
family members may invest in those restricted investments and may hold them
as long as they continue to be employed by that employer
and the investments continue to be held by the plan.
However, if you are a Covered Person for the restricted investment,
you need to further evaluate the reason for your Covered Person status to
determine whether the investment is permissible.
Why are you a Covered Person for the restricted entity?
If you are a Covered Person by virtue of being a member of the audit
engagement team for the restricted entity or a member of the chain of command
to the audit engagement, your immediate family member is not
permitted to invest in that entity.
If you are a Covered Person because you are a partner or member of the
management group providing non-audit services to the restricted entity,
or a partner or audit managing director in the office where the lead
audit engagement partner or lead audit managing director primarily
practices with respect to the audit, your immediate family member is
permitted to hold these restricted investments if there are no
other available investment options in unrestricted entities
(or in restricted entities for which you are not a Covered Person).
Determining the permissibility of investments in current employee benefit plans
If the investment is publicly traded, you may use the ticker symbol
to search for it in KICS. If there is no ticker symbol for the investment,
or you cannot find it in KICS,
additional research is needed to confirm the restriction status.
In these cases, you should contact Risk Management - Independence
for assistance in determining the restriction status before making any
benefit elections or investments.
You must timely manually record the individual investments
held through the employee benefit plans in your KICS account.
The requirement to manually record the investments in KICS
is because most benefit plan accounts cannot be enrolled in the KICS
Broker Import Program. Pay attention to statements and notifications
informing you of changes—including changes that you or your
immediate family member may not have initiated—so you can
timely report any updates in KICS.
Disposing of restricted investments
Keep your independence responsibilities in mind and take action
right away when an immediate family member changes employers.
Remember, these exceptions apply only to investments held in an
employee benefit plan with a current employer, not those
held in employee benefit plans with any former employers.
Therefore, you must ensure that any restricted investments held
via this exception are disposed of as soon as the immediate family
member has the right to do so – for example, upon leaving their employer
or retiring - and no later than 30 days thereafter.
Roll over former employee benefit plans
Any qualified defined contribution plans, such as 401(k) plans,
that you and your immediate family members hold with a former employer
are required to be rolled over into an employee benefit plan with
a current employer, or an IRA with a participating broker that
has been activated for KICS Broker Import, within
three months of terminating employment.