In all instances, the Division confirmed that the appropriate actions had been taken during the filing reviews. Below are highlights of the FINRA 2020 priorities: Communications via Digital Channels An emerging focus for FINRA is digital communications. Source: Audit Analytics SEC UPLOAD of comment letters related to Forms 10 -K and 10 -Q that were publicly available during the 12 -month periods ended on 30 June each year. Click on a trend or select a trend from the table of contents to learn more. guidance related to MD&A and key performance indicators and metrics may Approximately 19% of the comment letter conversations include a confidential treatment request from the firm to redact at least a portion of their response letter. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. The Office generally endorses these recommendations and makes additional recommendations in its report. Despite the differences in the ratings, the participants believed that, taken as a whole, the Division was achieving its primary objective to improve disclosure to investors. They generally rated training on new releases as good. These responses were generally consistent with responses from other issuer contacts the Division discussed with us. Other industry groups have manuals containing guidance on issues specific to that industry. Do not delete! The premises for using this approach are common to many applications that use a team approach to decision making (e.g., teams can process more and more diverse information than an individual, employees are closer to the information needed than anyone else, staff can make a good system fail or vice versa, etc.). By continuing to browse this site, you consent to the use of cookies. The Securities and Exchange Commission's Office of Inspector General (Office) evaluated the Division of Corporation Finance's (Division) comment letter process. Tell us about yourself, and well be in touch right away. The comments are then faxed to the issuer. Consider removing one of your current favorites in order to to add a new one. CEO survey: US CEOs brace for a recession of unknown magnitude. Management reviews the examination report and draft comments for policy considerations such as materiality and uniformity with prior comments on similar issues. of the Forms 10-K filed. The Office prepared the audit report. Over the past several years, Participants indicated that some reviewers read the entire filing before reviewing the examination report, others scanned the filing, while still others relied solely on the examination report. With her expertise in financial services industry, compliance and e-discovery, Marianna counsels Smarsh clients on meeting regulatory obligations, leveraging technology and guidance on best practices related to electronic communications supervision. expanded disclosures related to emerging issues. We obtained and analyzed information concerning successes, obstacles, recommendations, and effectiveness ratings related to the primary objective and six supporting objectives identified by the Division for the comment letter process. The supporting objectives reflect activities that increase the chances of achieving the primary objective. We also expect the SEC staff Participants indicated that improving these characteristics in the staff as a whole would also improve the comment letter process. These participants described instances where they were embarrassed when an issuer contacted them about a comment they knew nothing about, because the reviewer inserted it without their knowledge. Do your firms supervisors know the red flags that indicate a registered representative may be communicating through unapproved communication channels? Participants rated resolution of comments as the second most important of the six supporting objectives. Recent SEC disclosure rules and interpretive PwC. Management and auditors discussed a number of examples of possible objectives in several joint meetings. EY helps clients create long-term value for all stakeholders. 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. Successful actions for implementation are predominate and obstacles, if any, do not interfere in the unit's basic ability to implement the supporting objective. By Farzad F. Damania, Jennifer L. Howard and Ryan A. Lilley. Participants were asked to describe risks in the examination report/draft comment process. Insights. These comments are largely focused on information related to climate change-related risks and opportunities which may be required in disclosures of a companys description of business, legal proceedings, risk factors, and managements discussion and analysis of financial condition and results of operations (refer to the Commissions. considering new requirements related to cybersecurity and climate disclosures, Are you still working? the SECs Division of Corporation Finance (the Division) continues to selectively Under the Divisions filing review process, the Do Not Sell or Share My Personal Information. 2 For example, the Division contends that as a result of staff comments in FY 1996, forty-one companies were required to restate their income. Members utilizing this blocking functionality should periodically conduct tests to ensure that it is functioning as designed or intended. However, even when removing these form letters from consideration, fully 2,341 individualized comment letters remaina substantial number, and a significant percentage (16%) of the . Sometimes the review staff changes or the workload becomes such that no time is available for follow up on futures comments. This content is copyright protected. war, supply-chain disruptions, labor shortages, inflation, and rising interest 27 11. future area of focus for sec comment letterschucks and pearls meaning. The review staff faxes comments to the issuer, generally with a follow-up copy by mail. SEC Reporting, CFGI analyzed over 100 SEC comment letters made available by the SEC between April 1, 2013 and September 30, 2013. Exceptional organizations are led by a purpose. Both management and staff gave low ratings to the achievement of the program performance measures objective (management - 3.90, staff - 3.32). We collected data primarily through six workshops (fifty-six staff or approximately 17% of Division personnel participated in the workshops). 2019 - 2023 PwC. 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. Asking the better questions that unlock new answers to the working world's most complex issues. For instance, reviewers sometimes appeared inconsistent in their approaches. SEC Comment Letter 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. A SPAC is a newly formed company that raises cash in an This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Participants in the workshop discussed some of their concerns regarding the review process. All rights reserved. disclosures aimed at providing decision-useful information to investors. Communicate Comments - Develop and communicate (written and verbal) comments to the issuers or their representatives. Participants indicated that a more direct link between the training and the filings they actually review would make the training more effective. Securities Exchange Act of 1934. Comment Letters. 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. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. The sample comments focus specifically on the impact that "[r]ecent bankruptcies and financial . However, despite these concerns, participants indicated they were proud to work for the Commission, in particular the Division. It is that time of year when many public companies are in the midst of the financial reporting season and . [Appendix B contains the rating criteria used by the participants.] 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. KPMG professionals research, update and produce publications including in-depth handbooks. Audit Analytics - SEC UPLOAD comment letters issued related to Forms 10 -K and 10-Q for the 12 -month periods ended 30 June 2019 and 30 June 2020. Are you still working? We asked participants for their opinions on the pluses and minuses of working for the Commission, specifically the Division. remember settings), Performance cookies to measure the website's performance and improve your experience, Marketing/Targeting cookies which are set by third parties with whom we execute marketing campaigns and allow us to provide you with content relevant to you. Workshop participants agreed that the current process works well in resolving comments. Bell entered into a consent judgment to settle a civil lawsuit brought by the Securities and Exchange Commission . priorities: For a comprehensive discussion of PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. The printed document may contain agency comments, charts, photographs, appendices, footnotes and page numbers which may not be reproduced in this electronic version. Outline whether employees have the ability to communicate via email through means other than their firm email address and through third-party communication systems such as Bloomberg and Reuters. We also reviewed reports of registrations filed between October 1, 1996 and June 31, 1997 (1,228 registrations receiving full reviews and 567 registrations receiving a monitor for one or more specific items) to determine the timeliness of the initial filing review comments. Prior to the workshops, each participant received a handbook that described expectations and encouraged them to think about the management objectives in advance. of Professional Practice, KPMG US. Follow our podcast. Performance obligations: Nature of performance obligations - Descriptions of your contracts discuss several activities. It also highlights areas the SEC staff may . This also gave management a better understanding of the audit results, since they also analyzed the resulting issue worksheets. The CSA methodology used in the audit consists of four primary tasks: identify management objectives, convene workshops to discuss and rate each objective, evaluate the workshop data, and prepare an audit report. This includes retention of electronic communications such as email, text messages, instant messages, social media, and collaboration tools. This supplemental material is sometimes proprietary information that should be protected from public disclosure. The Division should remind issuers of the rules available to protect any proprietary supplemental information they provide to the Division and the procedures used to request the special handling. Comments may consist of requests for supplemental information, amendments to filings, or improvements in future filings (futures comments). Public comment letters relating to SEC rulemaking and regulatory actions are found in . Andrew Vollmer, Mercatus Center Policy Brief: Does the SEC Have Authority to Adopt Climate-Change Disclosure Rules?, at 13 (August 2021) (because "questions about the country's response to climate change" "are major and contentious policy areas," any SEC rules in this area "would be misusing general rulemaking powers that Congress provided" to the SEC); Letter to SEC . This training should result in a more consistent approach to review as well as improved communication. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. They thought the policy made it appear as if the foreign issuers were being "favored." Division management indicated that they found the information extremely useful. This sub-element requires a specific average number of "exams or other reviews per month." Sample Letter to Companies Regarding Climate Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Is related to reviews conducted by the The Division has already gotten approval for Internet e-mail access. In the letters, the regulators highlighted technology-related topics while also focusing on existing priorities, reminding firms of the need to adopt comprehensive supervisory processes that will ensure compliance and exam preparedness. However, in certain industries, such as real estate, banking, and insurance, the checklist is augmented by specialized requirements for that industry called industry guides. Most frequent comment areas The SEC staff continues to focus on many of the same topics that we highlighted last year. As registrants start to prepare for the 2022 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. complied with the existing interpretive guidance. They felt that segregating the accounting and legal comments in the comment letter would make it easier for the issuer to contact the originator of the comments. Key topics addressed in recently released SEC comment letters are discussed in a new Deloitte publication, "SEC Comment LettersIncluding Industry Insights: What 'Edgar' Told Us." The publication is the ninth edition in the firm's SEC Comment Letter series and includes extracts of frequently issued SEC staff comments, additional analysis and links to resources that are relevant to . review documents filed by registrants under the Securities Act of 1933 and the influence comment letter trends. A number of the aforementioned trends are likely to continue in Please see www.deloitte.com/about to learn more about our global network of member firms. We bring together extraordinary people, like you, to build a better working world. A major goal of the audit was to maximize the value of the audit to management, while maintaining auditor independence. Transactional filing reviews, such as those related to mergers and acquisitions (M&A), are a priority of the SEC to which it dedicates significant resources. activated.+++ DO NOT USE THIS FRAGMENT WITHOUT EXPLICIT APPROVAL FROM THE CREATIVE
Is based on SEC uploads (i.e., comment The letters all request that . In turn, the Chairman contacted some of the companies for feedback on their experience with the Division's filing review process. Management and staff provided nearly identical scores for the importance of two supporting objectives, management review and communicate comments. Regulators are focusing on both Reg BI implementation and technology, so make sure not to miss the mark. It also highlights areas the SEC staff . comments on accounting and reporting related to these matters. Currently, the two-week timeframe is only provided in unusual cases. Investment company examinations will focus on mutual funds and exchange-traded funds, the activities of their RIAs, and the oversight practices of their boards of directors. How does the health equity ecosystem move from awareness to action? Initially, the issuer communicates with the staff accountant and examiner. Our SEC Reporting Update publication highlights key trends in SEC staff comment letters issued during the year ended 30 June 2020, including comments on accounting and disclosures related to the COVID-19 pandemic, the use of non-GAAP measures, managements discussion and analysis and revenue recognition. They met twice to discuss the issues and identify potential actions to enhance the comment letter process. Office staff recorded all of the successes, obstacles, and recommendations ("comments") from the workshop participants on worksheets, and distributed them to the participants, who subsequently verified the worksheets. EY | Assurance | Consulting | Strategy and Transactions | Tax. 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. 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. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional . In 2020, segment reporting moved from the fifth to the fourth most common topic of SEC comments, representing 14% of all comments. All rights reserved. For more information about our organization, please visit ey.com. Communicate Comments 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. 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). If the firm elects to prohibit its use altogether, keeping employees from accessing non-member email platforms for business purposes, then there is a need to require employees to certify that they are acting in accordance with such policies and procedures on an annual or more frequent basis. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. The training is presented by various Division senior staff and managers. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. We use cookies to personalize content and to provide you with an improved user experience.
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