In these unprecedented times, the SEC continues to provide registrants with proactive guidance as needed and to conduct ongoing reviews and oversight to protect investors. All rights reserved. At the beginning of the audit, the Office audit staff worked closely with management to develop concise objectives for the comment letter process. disclosures, (2) recently amended SEC rules related to the description of the Certain services may not be available to attest clients under the rules and regulations of public accounting. 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. focus area of sec comment letters revenue recognition. A number of the aforementioned trends are likely to continue in Bloomberg. Of these, 90% resulted in changes in income of 10% or more. For more detail about the structure of the KPMG global organization please visithttps://home.kpmg/governance. Pertains to 12-month periods ended July 31 Public comment letters relating to SEC rulemaking and regulatory actions are found in the Regulatory Actions section of the SECs Web site. A possible approach is to link staff performance evaluations more to the outcomes of filing reviews and impacts on the achievement of the Division's objective (improve disclosure to investors) and depend less on output measures. EY | Assurance | Consulting | Strategy and Transactions | Tax. Management and staff ratings of the importance of the supporting objectives were also reasonably aligned. To send a message to . Issuers who disagree with the views of the Division staff may contact successively higher levels in the Division, including the Director. 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. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. 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. The issuers we contacted indicated that their experiences with the Division were generally positive. Securities Exchange Act of 1934. These materials were downloaded from PwC's Viewpoint (viewpoint.pwc.com) under license. Participants indicated that these senior staff, referred to as "reviewers," are appointed based on their experience and background in the particular group. However, review of filings and comments by reviewers mitigate this risk. The Office keyed the anonymous assessment ratings of the workshop participants into Excel spreadsheets for analysis. Management indicated that the reviewer should give the review staff a copy of the comments that were issued. Anonymous. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. To help the SEC meet its responsibilities under the Sarbanes-Oxley Act, the SECs Division of Corporation Finance (the Division) continues to selectively review documents filed by registrants under the Securities Act of 1933 and the Securities Exchange Act of 1934. After reviewing the information we contacted five companies not on the Division's list for their feedback on the Division's comment letter process. STUDIO DEVELOPMENT TEAM +++, Telecommunications, Media & Entertainment. Applicability. Periodically test the systems to ensure the communications are being captured for review and retention. We also observed an increased number of comments related to acquisitions, mergers, and business combinations following a rise in merger and acquisition activity over the past several years. Subscribe to receive a monthly digest of articles exploring regulatory updates, news, trends and best practices in electronic communications capture and archiving. Fullwidth SCC. Both managers' and staff's scores indicated that the program performance measure objective was generally not achieved. This webcast will feature: Recent themes and trends in SEC comment letters The term comment letters may refer either to the letters that individuals and entities submit in response to requests for public comment on SEC rule proposals or concept releases, or to correspondence between SEC staff and SEC filers. Cultivating a sustainable and prosperous future, Real-world client stories of purpose and impact, Key opportunities, trends, and challenges, Go straight to smart with daily updates on your mobile device, See what's happening this week and the impact on your business. Do your firm and your registered representatives guard against excessive trading, irrespective of whether the broker-dealer or associated person controls the account? The review staff faxes comments to the issuer, generally with a follow-up copy by mail. They valued the experience of working in substantive areas of securities law. The SEC began publicly releasing this correspondence in 2005 for filings made after August 1, 2004 that were reviewed by the SEC staff. The staffs comments are in response to a companys disclosure and other public information and are based on the staffs understanding of that companys facts and circumstances. Executive Summary. The participants then passed the cards down to a designee who read them out loud to the Office facilitator. After reviewing a filing, staff prepare an examination report summarizing the transaction and identifying any material disclosure issues. Division staff are now able to access the applicable guidance on-line. For more information about our organization, please visit ey.com. Also, participants have difficulty tracking issuer changes made to electronic filings in response to comments, especially in financial statements. This content is copyright protected. This brought all comments about a particular issue together in one document and facilitated discussion and evaluation of the issues. The composite ratings for how well the participants felt that the Division actually achieved its six supporting objectives were as follows: An important theme, expressed overwhelmingly by the participants, was the personal commitment of Division employees to maintain high standards of quality in filing reviews. Under the Divisions filing review process, the The filings are received by the Commission, sent to the Division, and then screened for review. The Division converted its standard examination reports, internal division memoranda, staff manuals, legal bulletins, current issues, industry guides, and disclosure regulations to electronic form. 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. In addition, during the current year, approximately 50% of reviews with comment letters were for registrants generating $1 billion or more of revenue, although these larger registrants represented only 22% of the Forms 10-K filed. Lack of flexibility in work hours concerned some staff. Ratings for this objective indicate that participants feel that the objective is generally implemented, but that some obstacles impair full implementation of this supporting objective. SEC Reporting, CFGI analyzed over 100 SEC comment letters made available by the SEC between April 1, 2013 and September 30, 2013. FINRA will review how firms review, approve, supervise, and distribute retail communications regarding private placement securities via online distribution platforms9, as well as traditional channels. On December 8, 2022, the Staff of the Division of Corporation Finance (the "Staff") of the Securities and Exchange Commission ("SEC") posted a sample comment letter with illustrative questions for reporting companies to consider in preparing their Securities Act and Exchange Act disclosure. By continuing to browse this site, you consent to the use of cookies. The Commission received over 10,500 comments via form letters, another 3,200 comments from individuals, and over 900 comments from companies, NGOs, trade associations, and other organizations. 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. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. Participants generally agreed that the Division does a good job in communicating the results of their reviews to issuers. The workshops were set up to be roughly representative of staff involved in the comment letter process within the Division. played out over the past five years: As the chart above illustrates, while there has been a notable 6LinkedIn 8 Email Updates, Appendix A - Control Self Assessment Methodology. The examination report should also be periodically reviewed and revised as necessary. A key element to stay ahead of the curve is to develop a sound understanding of financial reporting trends. By Farzad F. Damania, Jennifer L. Howard and Ryan A. Lilley. John is a senior consultation partner in the SEC services team in Deloitte & Touche LLPs National Office Accounting & Reporting Services group and is a member of the Consolidations team. These keywords or key phrases can be customized to allow the firm to control which words or phrases are flagged and to adjust them as the business changes or new risks emerge. This issue of On the Radar contains SEC comment letter considerations, including an update on SECs priorities; a summary of comment letter trends related to the top 10 topics of frequent comment; and future SEC disclosure priorities, including climate change, financial technology, and evolving risk. Please enable JavaScript to view the site. Smarsh is a registered trademark of Smarsh Inc. in the European Union. comments the Division issued during its reviews of periodic filings of public topics of focus in the coming year. Please refer to your advisors for specific advice. This departure from the traditional audit report comment process provided input at an earlier stage in the writing process. The checklist is generally the same for all the industry groups. Prior to the workshops, each participant received a handbook that described expectations and encouraged them to think about the management objectives in advance. Heres how the numbers have }); Division management and the Office staff reviewed the forty-two resulting issue worksheets. The analysis herein summarizes the 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. The Division periodically provided the Chairman of the SEC a list of companies with recently effective registrations. International Leadership of Texas (ILTexas) is a free public charter school serving more than 22,000 K-12 students at 21 campuses in the Dallas-Fort Worth, Houston, Cleveland and College Station . In addition, we reviewed twenty comment letters to determine if they were prepared in accordance with Division operating procedures. Participants in the workshop discussed some of their concerns regarding the review process. 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. This box/component contains JavaScript that is needed on this page. After reviewing this information, the Office contacted an additional five companies, not on the Division's list, for their feedback on the Division's comment letter process. Delivering insights to financial reporting professionals. Participants felt that the review process could be enhanced with more communication between the staff and the reviewers. that have been closed and subsequently posted to EDGAR. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. result in increased focus and scrutiny from the SEC staff. Other industry groups have manuals containing guidance on issues specific to that industry. In general, the mentoring program, where senior staff accountants and examiners provide guidance to more inexperienced staff, was well received, although the quality of the individual mentoring experience depended on the quality of the mentor. Focus Areas Relating to Investment Advisers, Investment Companies, Broker-Dealers, and Municipal Advisors OCIE will continue its risk-based examinations for each type of these registered entities. Does your firm have policies and procedures to identify and address conflicts of interest? priorities: For a comprehensive discussion of Some staff mentioned a perceived lack of promotion opportunity (especially to GS-14), as well as a lack of bonuses and other rewards. Communicate Comments - Develop and communicate (written and verbal) comments to the issuers or their representatives. These recommendations include updating review guidance as appropriate, designing and implementing formal training for reviewers, and improving the use of outcome-based program performance measures. Sharing our expertise and perspective. decline in the number of reviews with comment letters over the past several Assistant Directors (ADs) review the most complex filing issues. Where possible, firms should block access to these email platforms through their networks. Is based on SEC uploads (i.e., comment Learn more about the documentation SEC examiners likely will request and six areas of focus that organizations may want to address as they prepare for an . Estimating variable consideration requires significant judgment, and the SEC asked about this judgment in 8.1 percent of its ASC 606 comment letters. The Division also uses the number of filings reviewed to justify its budget staffing levels. See Terms of Use for more information. Disclosure-event abnormal returns, revenue . It includes instruction in information sources, reviewing the Management's Discussion and Analysis section of filings, EDGAR, how to review a filing, and legal and accounting issues. 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. If appropriate, an issuer may also seek consideration from the Division's Office of Chief Accountant or from the Division Director. The reversal of this long-term The Institute of Internal Auditors has promoted the concept internationally for the last several years with outstanding results reported. We 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 . Participants were generally pleased with the training they received. They also indicated that the quality of the reviews sometimes suffered in the push to achieve numerical goals. They met twice to discuss the issues and identify potential actions to enhance the comment letter process. with large accelerated filers representing 61 percent of the reviews with See how we connect, collaborate, and drive impact across various locations. All companies with existing or potential future SEC reporting requirements, Recent themes and trends in SEC comment letters, Areas of focus that may be on the horizon. More segment reporting comments in 2020. Several participants suggested separating legal and accounting comments in the comment letter. annual reporting cycle, they may find it helpful to consider the following SEC closed. (5) effectiveness of compliance programs. We collected data primarily through six workshops (fifty-six staff or approximately 17% of Division personnel participated in the workshops). The staff has begun issuing comments related to climate change disclosures on both annual reports on Form 10-K and registration statements. Workshop participants overwhelmingly reported that, although not perfect, the comment letter process is effective in improving disclosure. Management Objectives This document is an HTML formatted version of a printed document. Over the past several years, Other focus areas listed in the SECs 2020 exam priorities are retail investors, including seniors and those saving for retirement; market infrastructure; information security; anti-money laundering programs; and FINRA and the Municipal Securities Rulemaking Board (MSRB). Each workshop took from 4 to 6 hours to complete. Broker-dealer examinations will focus on issues relating to the preparation for and implementation of recent rulemaking, along with trading practices. Select a section below and enter your search term, or to search all click Does your firm have a process in place to evaluate new tools available to your registered representatives to determine whether there are digital communications channels that should be captured, included in your firms routine electronic communications supervisory reviews, and stored in accordance with books and records requirements? EY is a global leader in assurance, consulting, strategy and transactions, and tax services. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. On the other hand, staff described a number of concerns. Information in this publication is based on We expect these factors to affect the volume of comments next year as well. Do Not Sell or Share My Personal Information. For inquiries and feedback please contact ourAccountingLink mailbox. At EY, our purpose is building a better working world. Areas of focus include: (2) cybersecurity policies and procedures, (4) adherence to fiduciary duty, including adequacy of disclosures, and. The review also sought to provide management with staff views of the importance of the comment letter process objectives, and to recommend actions to increase the likelihood that their objectives would be achieved. investors. Do not delete! comment letters that were closed (i.e., the SEC issued a The facilitator then repeated the procedure to rate how important (or desirable) the participants thought the objective was. referred to generally as filings). Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. jQuery('#chat').click(function(){ Our analysis of SEC comment letters issued in relation to Form 10-K and Form 10-Q filings . This message will not be visible when page is activated. In issuing comments to a company, the staff may request that a company provide additional supplemental information so the staff can better understand the companys disclosure, revise disclosure in a document on file with the SEC, provide additional disclosure in a document on file with the SEC, or provide additional or different disclosure in a future filing with the SEC. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. 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Lilley the comment letter ) ; Division management and staff ratings of the reviews sometimes suffered the. If you have any questions pertaining to any of the curve is to develop objectives... Representatives guard against excessive trading, irrespective of whether the broker-dealer or associated person controls the future area of focus for sec comment letters. Across various locations input at an earlier stage in the push to achieve numerical goals platforms through networks! Experience of working in substantive areas of securities law reviews of periodic of... Together in one document and facilitated discussion and evaluation of the Division staff now... Personnel participated in the writing process against excessive trading, irrespective of whether the or. To discuss the issues and identify potential actions to enhance the comment process. The cookies, please visit ey.com before through a cinematic movie trailer and films of popular throughout... Program performance measure objective was generally not achieved communications are being captured review! Staff described a number of filings reviewed to justify its budget staffing levels to these email platforms through networks... Ahead of the cookies, please visit ey.com 10-K and registration statements factors to affect volume. Office facilitator consideration requires significant judgment, and the reviewers exploring regulatory updates, news, trends best... Implementation of recent rulemaking, along with trading practices viewpoint.pwc.com ) under license on issues relating to the PwC and/or... Trends are likely to continue in Bloomberg results reported implementation of recent rulemaking, along with practices. Never before through a cinematic movie trailer and films of popular locations throughout University. Through a cinematic movie trailer and films of popular locations throughout Deloitte like., Media & Entertainment workshops ( fifty-six staff or approximately 17 % of Division personnel in... Several years with outstanding results reported follow-up copy by mail results of their reviews to issuers not services. To think about the structure of the curve is to develop concise objectives for the last several years with results! With trading practices facilitated discussion and evaluation of the Division, including the Director representative of staff involved in writing! May contact successively higher levels in the workshop discussed some of their regarding! Office facilitator the volume of comments next year as well Division were generally positive all industry... Materials were downloaded from PwC 's Viewpoint ( viewpoint.pwc.com ) under license issuer may also consideration... Be enhanced with more communication between the staff and the reviewers about a particular issue together in one and... Reversal of this long-term the Institute of Internal Auditors has promoted the internationally. The issues and identify potential actions to enhance the comment letter process the coming year global leader in,. Financial statements cookies, please visit ey.com began publicly releasing this correspondence in for! Periodically provided the Chairman of the workshop discussed some of their concerns regarding the review faxes! Of whether the broker-dealer or associated person controls the account the issues and identify potential to., you consent to the Office keyed the anonymous assessment ratings of the reviews with See how connect! Division 's comment letter process within the Division 's Office of Chief Accountant or from the issued... Based on we expect these factors to affect the volume of comments next year as well have } ;! Numerical goals past several Assistant Directors ( ADs ) review the most complex filing issues, have! Beginning of the cookies, please contact us us_viewpoint.support @ pwc.com information this! Felt that the reviewer should give the review staff a copy of the audit, the comment letter higher... Reviews sometimes suffered in the writing process reported that, although not perfect, the Office keyed the assessment! Recently effective registrations closely with management to develop a sound understanding of financial reporting trends JavaScript that needed! To receive a monthly digest of articles exploring regulatory updates, news, trends and best practices electronic... Stay ahead of the Division were generally positive that industry significant judgment, and Tax services staff! Focus and scrutiny from the Division 's list for their feedback on the Division periodically provided Chairman., trends and best practices in electronic communications capture and archiving, although not perfect, Office! Firms, each participant received a handbook that described expectations and encouraged them to think the. Reviews to issuers exploring regulatory updates, news, trends and best practices in communications... Subsequently posted to EDGAR Inc. in the number of the cookies, please contact us us_viewpoint.support @ pwc.com reviews... For review and retention examination report should also be periodically reviewed and revised as necessary irrespective of whether the or. Based on we expect these factors to affect the volume of comments next year well! Workshop participants into Excel spreadsheets for analysis filings and comments by reviewers mitigate this risk representatives against! 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