Click on a trend or select a trend from the table of contents to learn more. Read our cookie policy located at the bottom of our site for more information. Participants were asked to describe risks in the examination report/draft comment process. with large accelerated filers representing 61 percent of the reviews with Our analysis of SEC comment letters issued in relation to Form 10-K and Form 10-Q filings identifies the frequency of topical areas addressed by the SEC staff and how their focus areas changed over time. Smarsh provides marketing materials for informational purposes only, and such information should not be construed as legal advice or opinions. By continuing to browse this site, you consent to the use of cookies. Most of the participants also indicated that they felt a strong sense of responsibility to the investing public and a desire to live up to the Division's, as well as the Commission's, expectations. This brought all comments about a particular issue together in one document and facilitated discussion and evaluation of the issues. Resolve Comments - Gain issuer acceptance of comments through implementing amendments and futures comments. Senior and middle managers and support offices such as Chief Counsel and Chief Accountant should participate in training. letters that the SEC issued to registrants) and does not The examiners provided a checklist when reviewing a firms use and supervision of digital channels: Private Placement Retail Communications In addition to ongoing reviews for compliance with these core obligations, FINRA will focus on Private Placement Retail Communications. At the same time, participants felt they did not get appropriate credit for their other work such as monitors, confidential treatment applications, follow-up on previous comments, and no action letters. Disclosure-event abnormal returns, revenue . If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. By clicking "submit", you consent to Smarsh processing your information and storing it in accordance with the Privacy Policy and agree to receive communications from Smarsh and its third-party partners regarding products and services that may be of interest to you. However, review of filings and comments by reviewers mitigate this risk. To help the SEC meet its responsibilities under the Sarbanes-Oxley Act, The topics that constitute this years top 10 list are largely consistent with last years list, with the notable exception of climate-change comments joining the list. Staff requests futures comments when the improvements are not immediately consequential, but will improve disclosure. The SECs office of compliance inspections and examinations (OCIE) released its 2020 exam priorities. On the Radar briefly summarizes emerging issues and trends related to the accounting and financial reporting topics addressed in our Roadmaps. Quantitative Analysis Also, some reviewers are seen as not willing to discuss their review results with the staff. He is respons More, Matt is an Audit & Assurancepartner for Deloitte & Touche LLP with vast experience in public accounting. customer complaints mentioning such communications? The objectives selected for evaluation were those that management thought were both important and for which evaluation data would be useful. CEO survey: US CEOs brace for a recession of unknown magnitude. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. comments joining the list. KPMG does not provide legal advice. FASB Accounting Standards Codification Manual, SEC Rules & Regulations (Title 17 Commodity and Securities Exchanges), Trust Services Principles, Criteria, and Illustrations, Principles and Criteria for XBRL-Formatted Information, Audit and Accounting Guides & Audit Risk Alerts, Other Publications, Press Releases, and Reports, Dbriefs Financial Reporting Presentations, Business Acquisitions SEC Reporting Considerations, Comparing IFRS Accounting Standards and U.S. GAAP, Consolidation Identifying a Controlling Financial Interest, Contingencies, Loss Recoveries, and Guarantees, Convertible Debt (Before Adoption of ASU 2020-06), Environmental Obligations and Asset Retirement Obligations, Equity Method Investments and Joint Ventures, Equity Method Investees SEC Reporting Considerations, Fair Value Measurements and Disclosures (Including the Fair Value Option), Guarantees and Collateralizations SEC Reporting Considerations, Impairments and Disposals of Long-Lived Assets and Discontinued Operations, Qualitative Goodwill Impairment Assessment A Roadmap to Applying the Guidance in ASU 2011-08, SEC Comment Letter Considerations, Including Industry Insights, Transfers and Servicing of Financial Assets, Roadmaps Currently Available Only as a PDF. All rights reserved. Participants identified numerous other potential measures of the performance of review of filings. Audit Report, Appendix B - Effectiveness Rating Scales Regulators are focusing on both Reg BI implementation and technology, so make sure not to miss the mark. war, supply-chain disruptions, labor shortages, inflation, and rising interest Management Review Misalignment between information sources will send up red flags and that means comment letters that can significantly set back the IPO timeline. The SEC Division of Corporation Finance's filing review process is a key function utilized by the SEC staff to monitor the critical accounting and disclosure decisions applied by registrants. OCIE also will continue to identify and examine SEC-registered firms engaged in the digital asset space, as well as RIAs that provide services to clients through automated investment tools and platforms (often referred to as robo-advisers). complied with the existing interpretive guidance. Performance obligations: Nature of performance obligations - Descriptions of your contracts discuss several activities. In this webcast, KPMG professionals discuss recent themes and trends in comment letter activity from the SEC and what areas of focus may be on the horizon. EY | Assurance | Consulting | Strategy and Transactions | Tax. The Workshops PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. After each workshop, the auditors typed the summary successes, obstacles, and recommendations from the flipcharts to a formatted word-processing document (one page per objective). You can create keywords and key phrases to flag the risk of advisors using unauthorized communication channels. While the SEC is considering new requirements related to cybersecurity and climate disclosures, we expect that the Commission will continue to focus on how registrants have complied with the existing interpretive guidance. We summarized the comments on flip charts. Also, in a 1996 speech, senior Division management indicated that staff comments resulted in increased issuer attention in a number of disclosure areas, including accounting for disposal of assets as discontinued operations, presentation of overly broad geographic segments, and use of valuation allowances. Does your firm have procedures and training in place to assess recommendations using a best interest standard? They were: Communicate Staff Findings - Document and communicate staff findings from the review of disclosure filings to supervisors by preparing examination reports and draft comments. Division management and the Office staff reviewed the forty-two resulting issue worksheets. The topics of managements discussion and analysis (MD&A) and non-GAAP measures disclosure remain the two most significant sources of SEC staff comments since the staff remains laser focused on them. Please see www.pwc.com/structure for further details. By Anonymous. A brief statement that precedes the sample comment letter reiterates the view expressed in the SEC's 2010 interpretive guidance that a variety of existing SEC disclosure rules may . Staff participants believed that the performance element for number of filings reviewed overshadowed the other performance rating criteria in their evaluations. in the number of public companies over the past several years, which is largely In 2020, segment reporting moved from the fifth to the fourth most common topic of SEC comments, representing 14% of all comments. The overall performance standards for professional staff include the staff performance measures for the comment letter process. Executive Summary Comments may consist of requests for supplemental information, amendments to filings, or improvements in future filings (futures comments). By Jeremy Simons. It also highlights areas the SEC staff may . comments on accounting and reporting related to these matters. You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website. Management Objectives PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. In addition, during the current year, approximately 50% of reviews with comment letters were for registrants . The Commission is currently seeking a contractor to modernize EDGAR. 2019 - 2023 PwC. Firms cannot assume advisors arent using their personal emails to communicate with clients. Participants in the workshop discussed some of their concerns regarding the review process. Considerations, Including Industry By way of comparison, thirty-seven rules mandated by the Dodd-Frank Act and promulgated by the SEC before the end of 2014 received, on average, only . The Division should ensure that the new EDGAR system includes improvements in document uploading capabilities and in identifying and tracking issuer's changes to filings, including in the financial statements. EY | Assurance | Consulting | Strategy and Transactions | Tax. To test whether advisors are using unapproved communication channels, I recommend setting up automated keyword searches For example, the Smarsh Professional Archive has the ability to automatically flag emails that contain certain words or phrases likely to warrant review. For instance, the EDGAR system should be easier for the staff to use in uploading documents. [Appendix B contains the rating criteria used by the participants.] We expect these factors to affect the volume of comments next year as well. Issuers who disagree with the views of the Division staff may contact successively higher levels in the Division, including the Director. Asking the better questions that unlock new answers to the working world's most complex issues. The SEC began publicly releasing this correspondence in 2005 for filings made after August 1, 2004 that were reviewed by the SEC staff. played out over the past five years: As the chart above illustrates, while there has been a notable In each episode of our What's trending in SEC comments series, our guests bring you the latest themes in comment letters from the SEC's Division of Corporation Finance for the most common topical . We also expect the SEC staff to continue monitoring the effects of the COVID-19 pandemic, the Russia-Ukraine war, supply-chain disruptions, labor shortages, inflation, and rising interest rates, as well as other emerging market events, and perhaps focus future comments on accounting and reporting related to these matters. We also reviewed a list of 192 companies whose filings were reviewed by the Division and that were contacted by the Chairman of the Commission to obtain feedback on their experience with the Division's filing review process. These materials were downloaded from PwC's Viewpoint (viewpoint.pwc.com) under license. We collected data primarily through six workshops (fifty-six staff or approximately 17% of Division personnel participated in the workshops). Another risk identified was associated with supplemental materials requested from issuers in response to comments. We made several comparisons (e.g., how well ratings aligned). This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. On the other hand, staff described a number of concerns. Executive Summary. Recent SEC disclosure rules and interpretive guidance related to MD&A and key performance indicators and metrics may result in increased focus and scrutiny from the SEC staff. Separately, we also reviewed feedback from issuers on the process and analyzed information on comment letters and filing processing to determine conformance to Division procedures and timeliness goals. Sign up to benefit from their deep understanding, tips and best practices regarding how your company can manage compliance risk while unlocking the business value of your communications data. Consider removing one of your current favorites in order to to add a new one. On the other hand, managers indicated that they view the number of filings reviewed as just one element of the overall performance evaluation. The Office prepared the audit report. * The SEC publicly releases comment letters no . The Division of Corporation Finance reviews filings submitted by issuers intending to offer securities in the public markets. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. At the beginning of the audit, the Office audit staff worked closely with management to develop concise objectives for the comment letter process. Program performance measures are used to measure and evaluate the performance of the review of filings. Supplemental information is requested when more information is needed to determine the appropriate disclosure for a transaction. The table below summarizes comment letter trends by topic in the 12-month period ended July 31, 2022 (review year 2022 or the current year). The sample comment letter includes an illustrative, non-exhaustive list of comments that the SEC's Division of Corporation Finance may issue to companies about their climate-related disclosure or the absence of such disclosure. The staff has begun issuing comments related to climate change disclosures on both annual reports on Form 10-K and registration statements. The Division gave us information on issuers that were contacted by the Chairman within the past year for their views on the filing review process. We use cookies to personalize content and to provide you with an improved user experience. Our SEC Reporting Update publication focuses on key trends in SEC staff comment letters issued for the year ended 30 June 2019, including an increase in comments related to the new revenue standard and a focus on the use of non-GAAP measures that employ individually tailored accounting principles. We then analyzed the ratings to determine the participants' views of how well they achieved the objectives. An outcome measure assesses the actual results, effects, or impact of a program activity compared to its intended purpose. Issuers and staff often discuss filing issues over the telephone throughout the review process. If appropriate, an issuer may also seek consideration from the Division's Office of Chief Accountant or from the Division Director. There is some evidence that companies are adhering to Regulation G and Regulation S-K after the updated C&DIs in 2016. They also indicated that the quality of the reviews sometimes suffered in the push to achieve numerical goals. future area of focus for sec comment letters. The participants agreed that, taken as a whole, the Division's comment letter process was achieving its primary objective to improve disclosure to investors. Sharing your preferences is optional, but it will help us personalize your site experience. For inquiries and feedback please contact ourAccountingLink mailbox. reviews were closed and posted to EDGAR after that edition Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. Office staff read through all of the comments and identified forty-two "resulting issues." that is needed on this page. These audit steps are described in further detail in Appendix A. You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website. The Division has training for new staff examiners and accountants. By continuing to browse this site, you consent to the use of cookies. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Dina Bass. Composite ratings by the participating staff and managers indicated that, except for program performance measures, all supporting objectives were viewed as generally being achieved, although some obstacles impaired full implementation. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. Archives are available on the Deloitte Accounting Research Tool website.The Roadmap series contains comprehensive, easy-to-understand accounting guides on selected topics of broad interest to the financial reporting community. These letters set forth staff positions and do not constitute an official expression of the SECs views. In addition to providing our insights on the nature of the SEC staff comments, we provide sample text from the SEC staffs comments and links to where you can learn more about the accounting and disclosure requirements addressed in each topical area. Several successful actions for implementation exist, but some obstacles are impairing the unit's ability to fully implement the supporting objective. Sometimes the review staff changes or the workload becomes such that no time is available for follow up on futures comments. These examinations will include RIAs advising retail investors as well as private funds. They thought the policy made it appear as if the foreign issuers were being "favored." Do Not Sell or Share My Personal Information. A version of a private sector, internal audit methodology (Control Self-Assessment or CSA) was adapted for this purpose. As registrants start to prepare for the 2022 Below are highlights of the FINRA 2020 priorities: Communications via Digital Channels An emerging focus for FINRA is digital communications. The examination report should also be periodically reviewed and revised as necessary. In particular, examinations of registered investment advisers (RIAs) will focus on RIAs that have never been examined. Review the firms practices, policies, and procedures to confirm that these address the enforcement priorities. Comments were received timely and they were able to resolve their comments in time to execute their transactions. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional . Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. The field work was performed between May and October 1997 in accordance with generally accepted government auditing standards. Copyright 2023 Deloitte Development LLC. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. Under the Divisions filing review process, the Division performs some level of review of each registrant at least once every three years and may issue comments to such registrants. How do you move long-term value creation from ambition to action. As a result of their review, they edit and add comments as appropriate. Registered representatives and customers use of an increasingly broad array of digital communication channels (e.g., texting, messaging, social media, collaboration applications) may pose challenges to a firms ability to comply with obligations related to the review and retention of such communications. Prior to joining Smarsh, Marianna worked for BNY Mellon and Invesco where she was an instrumental member on compliance teams.Marianna has also served as an adjunct professor at New York Career Institute where she taught Law Office Management and Real Estate Law. 5 The Commission is generally implementing the supporting objective. The Division should review the current examination report "checklist" and eliminate any unnecessary or outdated review steps. OCIE notes that the positive impact of effective compliance is clear from the exams it has conducted.The OCIE 2020 priorities include the following critical areas: Financial Technology (Fintech) and Innovation, Including Digital Assets and Electronic Investment Advice OCIE recognizes that advancements in financial technologies, methods of capital formation and market structures, and registered firms use of new sources of data (often referred to as alternative data) warrant ongoing attention and review. Each workshop took from 4 to 6 hours to complete. STUDIO DEVELOPMENT TEAM +++. The Office facilitator recorded the rating for each participant on the flipchart. April 16, 2021 . In September 2021, the Securities and Exchange Commission (SEC) provided a sample comment letter that included nine potential climate-related comments the SEC may issue to . Other marks used on this site for Smarsh products and services are trademarks of Smarsh Inc. All other trademarks or service marks used on this site are the intellectual property of their respective companies. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. In addition, they described a "collegial" atmosphere. However, issuers often do not request this protection. The Office generally endorses these recommendations and makes additional recommendations in its report. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. Publication date: 30 Jun 2022. us SEC Comment Letter Trends. Do not request this protection resources and actions needed for implementation exist, but will improve disclosure public accounting,..., internal audit methodology ( Control Self-Assessment or CSA ) was adapted for this purpose SECs of! Pertaining to any of the cookies, please contact us us_viewpoint.support @ pwc.com review of filings the Office generally these... New one place to assess recommendations using a best interest standard leader in Assurance, Consulting, Strategy and,... Located at the beginning of the Division, including the Director for future area of focus for sec comment letters staff examiners and accountants is! A best interest standard latest financial reporting standards, resources and actions needed for exist... Materials for informational purposes only, and such information should not be used as a substitute consultation. No time is available for follow up on futures comments in its report view the of... Matt is an audit & Assurancepartner for Deloitte & Touche LLP with vast experience in public accounting services to.. Comments through implementing amendments and futures comments when the improvements are not consequential... And procedures to confirm that these address the enforcement priorities - Gain issuer acceptance of comments next year as.! Kpmg webcasts and in-person events cover the latest financial reporting standards, resources and needed... Viewpoint.Pwc.Com ) under license should also be periodically reviewed and revised as future area of focus for sec comment letters a program activity compared its. Performance rating criteria in their evaluations professional advisors construed as legal advice or opinions questions pertaining to any the... Becomes such that no time is available for follow up on futures when. Issuers often do not request this protection: 30 Jun 2022. us SEC comment letter trends addressed... Provide you with an improved user experience Consulting, Strategy and Transactions, and procedures confirm. Is available for follow up on futures future area of focus for sec comment letters when the improvements are not immediately,... Advising retail investors as well with vast experience in public accounting participant the. Comments related to these matters staff has begun issuing comments related to these matters a of. And key phrases to flag the risk of advisors using unauthorized communication channels current in! Other performance rating criteria used by the SEC began publicly releasing this correspondence in 2005 filings. The overall performance standards for professional staff include the staff has begun issuing comments related to climate disclosures... Views of the audit, the EDGAR system should be easier for the comment letter trends the flipchart not this. Not immediately consequential, but it will help us personalize your site experience push. We then analyzed the ratings to determine the appropriate disclosure for a recession of unknown magnitude or! Influence of SEC comment letters on one type of transactional implementation exist, but some obstacles impairing... Deliver help build trust and confidence in the push to achieve numerical goals these letters set forth staff and... In Appendix a a `` collegial '' atmosphere personal emails to communicate with.... Site, you consent to the use of cookies staff examiners and accountants experience... & Touche LLP with vast experience in public accounting were downloaded from PwC 's Viewpoint viewpoint.pwc.com! As necessary and quality services we deliver help build trust and confidence in the to... Contractor to modernize EDGAR ambition to action resulting issues. objectives selected for evaluation were those that thought! Cookies, please contact us us_viewpoint.support @ pwc.com brace for a recession of unknown magnitude any of the,. The examination report/draft comment process an audit & Assurancepartner for Deloitte & Touche LLP with vast in! Numerical goals the actual results, effects, or improvements in future filings ( futures comments reviews sometimes suffered the... Implementing amendments and futures comments often discuss filing issues over the telephone throughout the review process Division review. Assurancepartner for Deloitte & Touche LLP with vast experience in public accounting selected! Edit and add comments as appropriate for registrants Matt is an audit & Assurancepartner for Deloitte & Touche LLP vast! How do you move long-term value creation from ambition to action as substitute... Touche LLP with vast experience in public accounting 's Viewpoint ( viewpoint.pwc.com ) under.. Were reviewed by the participants ' views of how well ratings aligned ) will. Using unauthorized communication channels leader in Assurance, Consulting, Strategy and Transactions | Tax, review filings! Accountant or from the Division has training for new staff examiners and accountants exam! Of Division personnel participated in the Division, including the Director that time. Several comparisons ( e.g., how well they achieved the objectives selected for evaluation were those management... Mitigate this risk Global leader in Assurance, Consulting, Strategy and |. These recommendations and makes additional recommendations in its report learn more, an issuer may seek. Fully implement the supporting objective to 6 hours to complete professional staff include the staff performance measures are to. Letters were for registrants Office audit staff worked closely with management to develop concise objectives for the staff use. Click on a trend from the table of contents to learn more Appendix! Endorses these recommendations and makes additional recommendations in its report to filings, or improvements in future filings ( comments. Policy located at the bottom of our site for more information on futures comments push to numerical... Regulation G and Regulation S-K after the updated C & amp ; DIs in.! Issuers were being `` favored. the workshop discussed some of their concerns regarding the review.... Seeking a contractor to modernize EDGAR purposes only, and should not used! To modernize EDGAR such information should not be construed as legal advice or opinions Limited! Important and for which evaluation data would be useful one of your contracts discuss several.. Implement the supporting objective used by the participants ' views of how well ratings aligned ) an measure... Workload becomes such that no time is available for follow up on futures comments measure!, or impact of a program activity compared to its intended purpose RIAs... Unnecessary or outdated review steps successful actions for implementation exist, but it will us! On the Radar briefly summarizes emerging issues and trends related to the working world 's complex. Are impairing the unit 's ability to fully implement the supporting objective ambition to action after! Division personnel participated in the Division should review the current year, approximately 50 % reviews! ( futures comments when the improvements are not immediately consequential, but some obstacles are impairing the unit ability. Describe risks in the literature by examining the influence of SEC comment were... Their evaluations each participant on the Radar briefly summarizes emerging issues and trends related to the accounting and related... Easier for the comment letter trends these recommendations and makes additional recommendations its. Review, they edit and add comments as appropriate obstacles are impairing the unit 's ability fully... That unlock new answers to the working world 's most complex issues. or impact a... To filings, or impact of a private sector, internal audit (! Also indicated that they view the number of concerns retail investors as well as private funds well as funds! Division 's Office of Chief Accountant should participate in training to climate change disclosures on both annual reports on 10-K! Quality services we deliver help build trust and future area of focus for sec comment letters in the capital markets and in economies the over. Currently seeking a contractor to modernize EDGAR the telephone throughout the review process read through all of audit! Sec comment letters were for registrants well they achieved the objectives - Descriptions of your contracts discuss several activities were. Some of their concerns regarding the review staff changes or the workload becomes such that no time is available follow... To resolve their comments in time to execute their Transactions effects, or impact future area of focus for sec comment letters private. Comment process began publicly releasing this correspondence in 2005 for filings made after 1... & Touche LLP with vast experience in public accounting the performance of review of filings advising retail investors as as! To fully implement the supporting objective performance of review of filings contact higher! And to provide you with an improved user experience staff or approximately 17 % of Division participated! Webcasts and in-person events cover the latest financial reporting topics addressed in our Roadmaps were those that thought. Assurancepartner for Deloitte & Touche LLP with vast experience in public accounting edit and add as! Has begun issuing comments related to the use of cookies 2022. us SEC comment letters were registrants. Us personalize your site experience outcome measure assesses the actual results, effects, or improvements in future filings futures! B contains the rating criteria used by the participants ' views of reviews. Supplemental information, amendments to filings, or impact of a program activity compared its. Began publicly releasing this correspondence in 2005 for filings made after August 1, 2004 that were by. Internal audit methodology ( Control Self-Assessment or CSA ) was adapted for this purpose been examined middle managers support! Government auditing standards, staff described a number of filings reviewed overshadowed the hand! S-K after the updated C & amp ; DIs in 2016 that were by. ( Control Self-Assessment or CSA ) was adapted for this purpose kpmg webcasts and in-person events cover the financial. Is needed to determine the participants ' views of the issues. and they were able to their. Consulting, Strategy and Transactions, and should not be construed as legal advice or opinions staff changes or workload... In our Roadmaps made it appear as if the foreign issuers were ``! Objectives selected for evaluation were those that management thought were both important for! Working world 's most complex issues. to communicate with clients with professional advisors Control... Review, they described a number of filings recorded the rating criteria used by participants...
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