The Securities and Exchange Commission has proposed amendments to its auditor independence rules to loosen the limitations on situations where someone in the auditor’s camp has a lending relationship with someone in the client’s camp.

The proposed rules would “refocus the analysis” that auditors must conduct to determine whether an auditor is independent when the auditor has a loan with shareholders at an audit client during an engagement, the SEC says in its proposing release. The analysis would focus “solely on beneficial ownership rather than both record and ownership,” the proposal says, and it would eliminate the bright-line ownership test of 10 percent with a “significant influence” test, which suggests auditors will have to use some judgment.

The SEC says the amendments would add a standard it calls “known through reasonable inquiry” to the language that describes the work auditors must do to identify beneficial owners of the audit client’s equity securities. Finally, the proposal would amend the definition of “audit client” for a fund under audit to exclude funds that otherwise would be considered affiliates of the audit client.

The SEC has been mulling what to do with its auditor independence rules since an issue surfaced at Fidelity in 2016 when the massive financial institution learned its Big 4 audit firm had an independence problem. The analysis led Fidelity to conclude the SEC’s independence rules were so restrictive the firm could not hire a capable audit firm that would be truly independent under the standard, prompting a no-action request. The SEC extended the no action relief for 18 months, and then extended it again indefinitely while it decided how to address the problem.

The impasse stems from the detailed requirements of Regulation S-X, which governs the form and content of financial statements and sets the qualifications for auditors to audit them. The “loan provision” in Regulation S-X says an auditor cannot be deemed independent if the firm, any of its auditors, and any of their family members has any loan with an audit client, the audit client’s officers or directors, or any “record or beneficial owners of more than 10 percent of the audit client’s equity securities.”

That’s a vast limitation that make it difficult for large firms like Fidelity that manage enormous numbers of funds to choose from one of a handful of audit firms with the reach and expertise necessary to perform the audit. The SEC proposal would also amend the rules to alter the restrictions on auditors with ties to funds of the audit client. The SEC says the proposed amendment would “without implicating an auditor’s objectivity and impartiality, address the compliance challenges associated with the application of the loan provision where the audit client is part of an investment company complex.”

The SEC will accept comments on the proposal for 60 days after it is published in the Federal Register.