SR-NYSE-2026-37 · Release 34-106128

NYSE internal-audit transition period — comment letter tracker

NYSE proposes to amend Sections 303A.00 and 303A.07 of the Listed Company Manual to extend the period in which a newly listed company must establish an internal audit function from one year to five years. This tracker classifies the comment letters filed on that proposal.

Prepared by Tzachi Zach, Fisher College of Business, The Ohio State University. Corrections and comments are welcome at zach.7@osu.edu.

Letters are classified by a three-rater ensemble of Claude (Anthropic), and this site is generated and was built with Claude.

Updated September 22, 2026.

Background

On July 31, 2026, the New York Stock Exchange (NYSE) filed a proposed rule change under Section 19(b)(1) of the Exchange Act to amend Sections 303A.00 and 303A.07 of its Listed Company Manual. The amendment would extend the transition period in which a newly listed company must establish an internal audit function from one year after listing to five years. The Commission published notice on August 13, 2026 (Release No. 34-106128; 91 Fed. Reg. 53,448).

What NYSE argues. First, that the one-year deadline is hard to meet: issuers have told NYSE they are handling competing business and regulatory obligations while upgrading accounting systems and internal controls and hiring staff, and building a capable function in that first year is difficult. Second, that waiting produces a better function rather than merely a later one — NYSE's argument is about the board, not the calendar: a newly listed company has a newly seated slate of directors, and it takes time for an audit committee to understand the business well enough to design an internal audit function worth having. Third, that other requirements cover the gap in the meantime: an audit committee of at least three independent directors under a written charter, management's assessment of internal control under Section 404(a) of the Sarbanes-Oxley Act, the auditor's attestation under 404(b), and the CEO and CFO certifications under Sections 302 and 906. NYSE notes that Sarbanes-Oxley post-dates its own internal audit requirement, and treats internal audit as a supplement to those statutory protections rather than the other way round. Finally, that Nasdaq requires no internal audit function at all, so a company could list there with none — which, on NYSE's reading, makes a five-year transition no cause for concern. NYSE solicited and received no comments before filing.

This is a self-regulatory organization rule filing, not a Commission rulemaking. It poses no numbered questions, and the Commission must within 45 days of publication — extendable to 90 — approve the change, disapprove it, or institute proceedings under Section 19(b)(2)(B) to determine whether it should be disapproved.

Thank you

Sarah McVay helped significantly in building the classification scheme.

I also thank Mert Erinc for comments and suggestions.

Further feedback is welcome at zach.7@osu.edu.

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At a glance

128
letters on the docket (+3 Type A)
127
read in full and coded
123
oppose the five-year extension — 97% of coded letters
1
support it — 1%
88
written by internal audit professionals — 69%

Position

What the writer asks the Commission to do

Majority of three raters. Support = backs the proposal (five years); Oppose = keep the one-year rule, or otherwise object to the extension. A writer who asks for a shorter extension is an Oppose letter whose remedy records the period sought — see "Asks for" on the letters page.

Oppose — keep one year Support — five years No position / Off-topic
Oppose
123
Support
1
No position
3
Off-topic
0

The docket is not unanimous. One letter backs the change — #9, John Heagy, who argues the cost of the function outweighs its value at a newly listed company and adds that five years may itself be too long. 3 letters take no position on the five-year period: #1, #3, #88. 2 of them ask only for a longer comment period, and the third offers the Commission an assessment framework instead of an opinion on the transition period. Among the 123 opposing letters, 16 ask the Commission to institute proceedings under Section 19(b)(2)(B) and 13 ask for a longer comment period. Both asks appear only on letters written from scratch, never on one built from a shared template.

Who is filing

Entity majority call. Where a writer works in internal audit, the function decides the bucket, not the employer.

Internal audit professional
88
Individual
16
Professional body / trade association
8
Accountant / external auditor (CPA)
7
Consultant / advisory firm
4
Academic researcher or academic body
2
Investor advocacy org
1
Issuer / Corporate — current
1

Arguments advanced

Multi-select; each code swept 1/0 on every letter. Hover a code for its definition, or open the methodology below for the full list.

HIRISK
109
FOUNDATION
85
FEAS
72
NONSUB
70
INVPROT
49
COST
49
NOEV
45
404B
30
SCOPE
29
LEGACY
18
NASDAQ
18
IMPETUS
15
5YRS
12
CAPMKT
9
NR
3

Campaign provenance

Form-letter families across the whole docket

Assigned mechanically, before any letter was classified. The 108 letters that match nothing are not charted.

A — verbatim (SEC Type A)
3
B — shared scaffold
18
Pair match
6
Family A is the SEC's own designation: three letters filed as verbatim copies of one another, which the docket collapses behind a single entry — read the Type A letter on sec.gov. A pair match is two letters that are near-copies of each other but belong to no larger family; there are three such pairs on this docket, each matching at better than four fifths of its phrasing.
Family B is not designated by the SEC. Eighteen letters share a fixed opening frame — "I am an internal audit professional with [N] years in the profession, and I hold the [credential] designation. I write in my personal capacity. My views are my own and not those of my employer." — with original bodies after it. Verbatim matching misses it; whole-document TF-IDF cosine misses it. Only anchor-phrase detection finds it.

Where raters disagreed

Rater agreement

All three votes are retained on every judged field. A call is unanimous when the three raters agree, majority when two of three agree, and split when all three differ — in which case the Primary rater's call is stored and the record is flagged for review.

FieldCallsUnanimousMajoritySplitNot unanimous
Position127119 53 6%
Entity127104 230 18%
Every three-way position split — 3 of them — is a letter that never states what the Commission should do. The Literalist reads Oppose because the status quo is one year, the Charitable rater reads Support because nothing in the letter objects, and the Primary rater reads No position, which is the stored call. The 5 majority position calls are all the same 2-1: the Charitable rater alone reads the letter the other way. That is the third rater doing its job rather than a contested record. 19 of the 23 non-unanimous entity calls involve the internal audit bucket: a writer who works in internal audit but does so as a CPA, at an advisory firm, or without naming an employer, so the function and the affiliation point to different buckets. The rule is that the function wins.

Methodology

How a letter is classified what is recorded · how each value is decided · who the three readers are · the 15 argument codes

1What is recorded for each letter

Position — what the writer asks the Commission to do about the proposal. One of Support, Oppose, No position or Off-topic.

The proposal is a relaxation of a standard that already exists, so the labels run the way the proposal runs, not the way the comment volume runs: Support means backing the change to five years, and Oppose means asking the Commission to keep the existing one-year rule, or objecting to the extension on any ground. A writer whose first choice is a shorter extension is opposing five years, so the position is Oppose and the period they name is recorded under remedy.

Entity — who is writing. The scheme offers 11 buckets; 8 of them are occupied on this docket. Where a writer works in internal audit, the function decides the bucket rather than the employer: an internal audit manager at a listed issuer is an internal audit professional, not an issuer.

Arguments — which of the 15 reasons listed below the letter actually makes. A letter can carry any number of them, including none.

Recorded once, without the ensemble: the remedy and the period or schedule it names, the procedural ask, the internal-audit sub-role, and a 0–3 specificity score. Extracted rather than judged: dates, word counts, source links, and the form-letter family.

Procedural asks are coded independently of position, and only where the letter actually makes the request: PROC_EXTEND, a longer comment period, and PROC_PROCEEDINGS, proceedings under Section 19(b)(2)(B). A letter can ask for one of these and take no position at all.

2How each value is decided

Position, entity and every argument code are decided by an ensemble rather than by one reading. The same letter is read three times under three different sets of instructions, and the majority of three is the stored value.

All three votes are kept and published, not just the winner. Each call is marked unanimous when the three agree, majority when two of three do, and split when all three differ — in which case the Primary reader's call is stored and the record is flagged. No value is ever overridden by hand.

The arguments are decided by a per-code sweep: for every letter the full list is walked and each code is answered yes or no on its own, by all three readers. Codes are never free-listed from memory, which is how a reader misses the argument they were not thinking about.

3Who the three readers are

The three differ by what they are willing to infer. Each field gets the trio that stresses it.

  • For positionPrimary reads the letter in good faith and in context. Literalist takes only what the letter says explicitly, and defaults to Oppose because the status quo is the one-year rule. Charitable-to-the-proposal defaults to Support unless the letter explicitly objects. The third exists so that a genuine Support letter is found rather than absorbed into an Oppose-heavy docket.
  • For entityPrimary follows the letterhead. Self-described takes the writer's own first identifier. Letterhead / functional takes the strongest functional credential.
  • For each argument codePrimary asks whether the argument is substantively engaged. Literalist accepts explicit surface evidence only. Inclusive accepts a plausible or allusive invocation.

4Rules that hold the reading together

Every reader reads the whole letter. Each record's word count must equal the word count of the stored letter body, and a file that cannot be read in full is a stop rather than a partial read. Letters in this docket routinely open with a procedural request and object on the substance only later in the body.

Evidence is kept separate by what it supports. Every coded argument carries a verbatim quote from the letter — an exact substring, never a paraphrase. The position and each procedural ask carry their own quote, so the words a writer uses to state an ask are never pooled with the words used to argue the merits. A letter that argues a case but never states an ask is marked as such rather than given a stand-in quote; 23 of the 127 coded letters are in that position. Every quote and every rater vote is on the evidence page.

Form letters are clustered before anything is classified, because a shared scaffold is invisible in any single letter and only appears across the corpus. Verbatim families are reported as one entry with a signatory count; scaffold families keep their letters as separate rows, because their bodies differ.

5How reproducible the scheme is

13 letters were coded twice, in two separate runs under the same rules, with the second run given no access to the first. Position agreed on 13 of 13, entity on 13 of 13, and the remedy field on 11 of 13; the argument codes overlapped at a mean Jaccard of 0.97, comparing like with like — one code was renamed between the two runs and two were added after the first, so the rename is followed through and the later codes are held out of both sides. The disagreements are in the remedy field, where the same letter can be read as asking to keep one year or as requesting no modification at all. That is the measured reproducibility of the scheme, not a claim about its accuracy.

Argument codes

HIRISK
The years right after listing are when internal control risk is highest — rapid growth, new systems, organizational change. The claim is not that risk exists but that this period is a peak.
NONSUB
SOX 302/404/906, the audit committee and the external auditor are complements to internal audit, not replacements. Includes the argument that a five-year gap leaves the audit committee without its own independent, management-facing source of assurance.
404B
EGC, smaller-reporting and non-accelerated filer exemptions remove 404(b) attestation over the same issuers and the same window — compounded by the SEC's concurrent filer-status proposal (S7-2026-18).
FEAS
Internal audit can be small, risk-based, co-sourced or outsourced, and companies meet the one-year deadline today, so the asserted burden is overstated.
NOEV
The filing offers no data, no affected population, no cost estimate; no comments were solicited or received.
NASDAQ
Nasdaq's absence of a requirement is not an appropriate benchmark, or is a race to the bottom.
INVPROT
Engages Section 6(b)(5) and whether the filing meets the statutory investor-protection burden.
FOUNDATION
Governance habits, culture and accountability must be established at the start of a company's public life.
SCOPE
Internal audit's scope has broadened since 303A.07 was adopted in 2003 — cybersecurity, third-party, AI, operational resilience — so deferral now defers more.
CAPMKT
Control quality is priced: cost of equity, loan spreads, crash risk, IPO underpricing, information asymmetry.
LEGACY
Section 303A.07 as adopted in 2003 carried NO transition period. The one-year transition was added in 2013 and approved as 'limited in duration'. This proposal is therefore the second relaxation, not the first. Also covers the post-Enron/WorldCom origin.
COST
Cost and management bandwidth of standing up an internal audit function at a newly public company. Coded on any letter that engages the burden, whatever its position: an opposing letter that concedes the cost and argues it is worth paying is coded COST.
IMPETUS
What changed, and why now. The 2013 one-year transition had a visible occasion — the JOBS Act and the 404(a) transition for emerging growth companies. This filing identifies no comparable development. Distinct from NOEV, which is about the absence of evidence on costs and benefits rather than the absence of a reason to act at all.
5YRS
The specific length is unjustified. Nothing in the filing explains why five years rather than two, three, or a period tied to filer status or a milestone.
NR
States a position with no stated reason. Applied only when no other code lands, and never on a No position or Off-topic letter.