By Sarah N. Lynch
WASHINGTON (Reuters) - Deloitte & Touche LLP will pay more than $1 million to settle charges that it violated auditor independence rules, after its consulting arm maintained a relationship with a trustee who served on boards for funds Deloitte audited, U.S. regulators said.
The Securities and Exchange Commission said the trustee, Andrew C. Boynton, and the funds' administrator ALPS Fund Services, also settled charges in the case.
SEC rules require auditors to maintain a degree of independence from clients whose books they review. That's because auditors are meant to serve as watchdogs for investors, and are not supposed to get too close to their clients.
The SEC said that Deloitte failed to follow its own policies and conduct an independent consultation prior to entering into a business relationship with Boynton.
The SEC said Boynton was paid consulting fees for external client work by Deloitte Consulting LLP. At the same time, Deloitte was auditing funds and was claiming to be independent, even though Boynton was serving on those funds' boards and audit committees.
A spokesman for Deloitte said the company "self-identified" the independence matter after it had put in place enhanced procedures and voluntarily reported it to the SEC in March of 2012.
"As an organization committed to safeguarding the capital markets, we strive for continuous improvement. We are pleased to resolve this matter and are confident that our enhanced policies, training and monitoring will maintain ongoing compliance," said Deloitte spokesman Jonathan Gandal.
Kenneth Lench of Kirkland & Ellis LLP, who represents Boynton, said his client is "pleased to have this matter behind him."
An ALPS spokeswoman said the fund does not comment on legal issues as a matter of corporate policy.
All of the defendants in the case settled without admitting or denying the charges.
Boynton will pay more than $60,000 to settle the case, and ALPS will pay $45,000.