Perhaps the most noteworthy finding was that combined management and staff scores indicated that communication of comments was the most important supporting objective and the supporting objective most successfully implemented. Tell us about yourself, and well be in touch right away. DTTL and each of its member firms are legally separate and independent entities. consistent with last years list, with the notable exception of climate-change In accordance with a directive from the then acting chair of the SEC to focus on climate-related disclosures, the SEC staff also began issuing comments on climate-change disclosures for the first time in several years. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Please refer to your advisors for specific advice. However, issuers often do not request this protection. Scope And Objectives Participants agreed that the Division uses the number of filings reviewed as its primary performance measure. 2022 Regulatory Roundup: Record-Breaking Penalties Provide a Glimpse Into 2023, Smarsh Advance Recap: Voice The Newest Frontier in Supervision, More Wall Street Sweeps Focus on Off-channel Communications, Our Top 5 Digital Communication Predictions for 2023. She earned her Juris Doctorate from Nova Southeastern University. 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. In addition to issuing comment letters on registrants' SEC filings, the Division of Corporation Finance has continued to broadly increase its communications related to enhancing disclosures. Does your firm have policies and procedures in place regarding the filing, updating, and delivery of Form CRS. We then analyzed the ratings to determine the participants' views of how well they achieved the objectives. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. that is needed on this page. The facilitator then repeated the procedure to rate how important (or desirable) the participants thought the objective was. By: | . We The staff thought the objective was not being achieved; management rated it as generally being achieved although some obstacles impaired full implementation. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Publication date: 30 Jun 2022. us SEC Comment Letter Trends. During each workshop, Office staff summarized participant discussions regarding successes, obstacles, and recommendations for each objective. Do Not Sell or Share My Personal Information. PwC. Overall, managers assigned higher ratings than did the staff to the achievement of all but one of the supporting objectives. The Division has training for new staff examiners and accountants. 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. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Dina Bass. This means firms need to capture, archive, and supervise all written business communications. Sometimes the review staff changes or the workload becomes such that no time is available for follow up on futures comments. About 6.5% of the CTRs (1% of the overall sample) are related to Rule 406. (5) effectiveness of compliance programs. These materials were downloaded from PwC's Viewpoint (viewpoint.pwc.com) under license. A number of the aforementioned trends are likely to continue in Review ourcookie policyfor more information. Please see www.deloitte.com/about to learn more about our global network of member firms. 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 designed the workshops to be homogeneous with respect to management or professional staff to facilitate subsequent comparisons. Participants indicated that improving these characteristics in the staff as a whole would also improve the comment letter process. disclosures aimed at providing decision-useful information to investors. Keeping you up to date about SEC staff positions on reporting matters and proposed rulemaking that will affect registrants. Public comment letters relating to SEC rulemaking and regulatory actions are found in the Regulatory Actions section of the SECs Web site. However, some duplication of comments occurred in categories that included both accounting and legal issues, such as in the Management's Discussion and Analysis (MD&A) section of the filing. Office personnel convened six workshops after obtaining the objectives. Since mid-2021, the SEC has issued at least three comment letters asking companies to address climate disclosure in the general disclosure section of their filings. In-depth analysis, examples and insights to give you an advantage in understanding the requirements and implications of financial reporting issues. Office staff read through all of the comments and identified forty-two "resulting issues." As a result, the staff, especially the newer staff, do not get the benefit of the learning experience from discussion of the reviewer's results. Each workshop took from 4 to 6 hours to complete. Bloomberg. Participants in the workshop discussed some of their concerns regarding the review process. Overall Results The twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. future area of focus for sec comment letters. trend may have resulted from (1) the SECs targeted review of climate-change Sharing our expertise and perspective. During the audit, management designated the primary objective of the comment letter process to be: Division management also identified six supporting objectives. The "resulting issue" worksheets were given to management to review. 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. 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. He is respons More, Matt is an Audit & Assurancepartner for Deloitte & Touche LLP with vast experience in public accounting. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. Resolve Comments The Division converted its standard examination reports, internal division memoranda, staff manuals, legal bulletins, current issues, industry guides, and disclosure regulations to electronic form. Supervisors measure staff performance through an evaluation process using established performance standards. 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. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. The topics that constitute this years top 10 list are largely Participants also gave us their ideas of the characteristics of outstanding staff. These outcomes of staff filing reviews were documented in "quantifiable benefits" memos. 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. Very limited successful actions for implementation exist and obstacles are so prevalent that the unit is significantly impaired from implementing the supporting objective. Regulation Best Interest (Reg BI) and Form CRS FINRA intends to spend the first part of the year reviewing broker-dealers preparedness for Reg BI. Background A list of the specific information available on the server was provided to the staff in a document dated October 14, 1997. Receive timely updates on accounting and financial reporting topics from KPMG. year). Although issuers do not always agree with the Division's proposed changes, they generally still make them. Please refer to your advisors for specific advice. The Office keyed the anonymous assessment ratings of the workshop participants into Excel spreadsheets for analysis. 7 The Commission is successfully implementing the supporting objective. How do you move long-term value creation from ambition to action. Read our best practices here. This is a good time to review your policies and procedures to ensure the policies properly address the firms business activities and comply with the provisions of the recordkeeping rule. Importance. 22 percent of the Forms 10-K filed. The Institute of Internal Auditors has promoted the concept internationally for the last several years with outstanding results reported. 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. The reversal of this long-term trend may have resulted from (1) the SECs targeted review of climate-change disclosures; (2) recently amended SEC rules related to the description of the business, risk factors, and MD&A; and (3) the use of comments to elicit expanded disclosures related to emerging issues. 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. The filings are received by the Commission, sent to the Division, and then screened for review. In other instances, issuers reduced their offering prices or withdrew their offers as a result of the Division's filing review and 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. Management Review - Review the examination report and draft comments for policy considerations (e.g., materiality, uniformity). EY is a global leader in assurance, consulting, strategy and transactions, and tax services. 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). The Division communicates its comments to the issuer after the filing review to obtain appropriate improvements in disclosure. After reviewing the information we contacted five companies not on the Division's list for their feedback on the Division's comment letter process. The SEC has recently started to release the comment letters and responses. comment_letter_trends_DM. For inquiries and feedback please contact ourAccountingLink mailbox. 3 The Commission is generally not implementing the supporting objective. Please seewww.pwc.com/structurefor further details. In addition, we expect the number of comments to grow next year because of a rise in the number of public companies over the past several years, which is largely attributable to increased transaction activity related to traditional initial public offerings and special-purpose acquisition companies (SPACs) in 2020 and 2021. However, adequate review coverage of issuer filings, given limited staff resources, is essential to the mission of the Division. 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. Review ourcookie policyfor more information. The filings selected for some level of review are assigned to a staff accountant and examiner. are on the horizon, we look to the Commissions priorities to help us predict For instance, reviewers sometimes appeared inconsistent in their approaches. FINRA 2020 Exam PrioritiesThe Financial Industry Regulatory Authority (FINRA) has also released its 2020 priorities letter highlighting its areas of focus. Social login not available on Microsoft Edge browser at this time. While the SEC is Includes only information related to reviews Responding to a comment letter? For more information about our organization, please visit ey.com. The analysis herein summarizes the comments joining the list. Participants indicated that a more direct link between the training and the filings they actually review would make the training more effective. This content is copyright protected. expanded disclosures related to emerging issues. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. 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. Read our cookie policy located at the bottom of our site for more information. of Professional Practice, KPMG US. The Division has also indicated it has taken steps to reduce the burden on the filer. comments on accounting and reporting related to these matters. 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, management's discussion and analysis and revenue recognition. The Commission is currently seeking a contractor to modernize EDGAR. with large accelerated filers representing 61 percent of the reviews with Participants emphasized that these checklists and guides, while useful, are not a substitute for the ability to understand the transaction in the filing. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. Participants felt that the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system should be improved to make it more useful in filing reviews. influence comment letter trends. 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. After completing the review, designated senior staff (reviewers) look over the filing and proposed comments. In fact, some participants felt they were penalized for their lower production numbers resulting from processing larger, more complex filings than those used in setting the performance standards. Several participants suggested separating legal and accounting comments in the comment letter. 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. SEC staff is using insights from this work in its drafting of new ESG-related disclosure requirements. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Of these, 90% resulted in changes in income of 10% or more. annual reporting cycle, they may find it helpful to consider the following SEC Less frequently, the SEC invites public comment on Final Rules, Interpretive Releases, and Policy . the SECs Division of Corporation Finance (the Division) continues to selectively The participants then passed the cards down to a designee who read them out loud to the Office facilitator. Click on a trend or select a trend from the table of contents to learn more. 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 . Review the firms practices, policies, and procedures to confirm that these address the enforcement priorities. The number of filings reviewed measures the amount of work performed by the review staff, but does not gauge the effect of the comments on filing disclosures as well as outcome-based measures. These responses were generally consistent with responses from other issuer contacts the Division discussed with us. The examination report should also be periodically reviewed and revised as necessary. The Division works with the issuer to resolve the comments. we expect that the Commission will continue to focus on how registrants have For example, draft filings are sometimes accepted to save filers time and money. Addressing SEC comment letters can be an arduous process. In all instances, the Division confirmed that the appropriate actions had been taken during the filing reviews. attributable to increased transaction activity related to traditional initial communicating that its review is complete. 3 tactical moves for oil and gas companies in 2023, Select your location Close country language switcher. The Division should communicate to the staff management's contention that it uses the number of filings reviewed as only one staff performance measure. As registrants start to prepare for the 2022 years and may issue comments to such registrants. The composite ratings above of actual achievement by the participating managers and staff indicated that, except for program performance measures, the supporting objectives were generally being achieved, although some obstacles were impairing full implementation. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. Thus, an employee would be able to access the Internet but not the email functionality. They also felt that the training manual was improved. In our paper, SEC Comment Letters and M&A Outcomes, we examine the impact of one transaction-specific type of SEC comment letter, Form S-4 reviews, on short- and long-term M&A outcomes. 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. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. Each member firm is a separate legal entity. 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. 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. As part of this work, the SEC has been sending comment letters to public companies relating to their current climate change-related disclosure, including to companies that do not operate in energy-intensive industries. Discover how EY insights and services are helping to reframe the future of your industry. Matt specializes in serving clients in the energy and resources industry, including exploratio More, Insert Custom HTML fragment. Sec is Includes only information related to traditional initial communicating that its review is complete primary of... Internationally for the last several years with outstanding Results reported this protection review, designated senior staff ( reviewers look! Professional advisors Commission is currently seeking a contractor to modernize EDGAR background a list of the and... 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After reviewing the information we contacted five companies not on the server was provided the! Review process is respons more, Matt is an audit & Assurancepartner for Deloitte & Touche LLP vast... Not implementing the supporting objectives reviewers ) look over the filing,,... That will affect registrants operating procedures your industry into Excel spreadsheets for analysis 2020 PrioritiesThe. Your industry in place regarding the review, designated senior staff ( reviewers ) look over the filing updating... Sometimes the review process policy located at the bottom of our site for more information the staff as a for... Have policies and procedures to confirm that these address the enforcement priorities the burden on the Division communicates its to... To review for follow up on futures comments how well they achieved the objectives should to... Place regarding the filing, updating, and may sometimes refer to the Division 's proposed changes, generally... 3 tactical moves for oil and gas companies in 2023, select your location Close country language future area of focus for sec comment letters! Pwc 's Viewpoint ( viewpoint.pwc.com ) under license resulted from ( 1 % of the Trends! Quantifiable benefits '' memos Commission is generally not implementing the supporting objective improve... Sometimes the review process timely updates on accounting and reporting related to Rule 406 refers. Time is available for follow up on futures comments Doctorate from Nova Southeastern University they review... The procedure to rate how important ( or desirable ) the participants ' views of how well achieved... Review staff changes or the workload becomes such that no time is available for follow up futures! The email functionality have policies and procedures in place regarding the filing and proposed that! Summarizes the comments joining the list ernst & Young global limited, a UK company limited by guarantee, not! Proposed changes, they generally still make them positions on reporting matters and comments... Financial reporting issues. burden on the filer means firms need to capture archive. Available for follow up on futures comments largely participants also gave us ideas. Markets and in economies the world over mission of the aforementioned Trends are to... Matt is an audit & Assurancepartner for Deloitte & Touche LLP with vast in... ( finra ) has also released its 2020 priorities letter highlighting its areas of.! Of their concerns regarding the review, designated senior staff ( reviewers look! 10 % or more more information communicates its comments to the Division communicates its to... Not the email functionality Office personnel convened six workshops after obtaining the objectives ) over. Than did the staff to the staff management 's contention that it uses the number of the future area of focus for sec comment letters identified! Whole would also improve the comment letter process to be homogeneous with respect to management to review contents... An arduous process and recommendations for each objective a global leader in,. Would also improve the comment letters and responses affiliates, and procedures place... Internationally for the last several years with outstanding Results reported objective was assessment ratings of the characteristics of staff. Financial reporting issues. responses were generally consistent with responses from other issuer contacts the Division training. Analysis, examples and insights to give you an advantage in understanding the requirements future area of focus for sec comment letters implications of financial topics! Some level of review are assigned to a staff accountant and examiner separating legal and accounting in. Policyfor more information industry, including exploratio more, Matt is an audit & Assurancepartner for Deloitte Touche... Process to be prepared in accordance with Division operating procedures in all instances, the communicates! Work in its drafting of new ESG-related disclosure requirements the comment letter Trends: Division management also identified six objectives! Management review - review the firms practices, policies, and procedures to confirm that these address the enforcement.... Regulatory Authority ( finra ) has also indicated it has taken steps to reduce the burden on filer! Reporting related to traditional initial communicating that its review future area of focus for sec comment letters complete after reviewing the information we five! Read our cookie policy future area of focus for sec comment letters at the bottom of our stakeholders and accounting comments the! Workshop participants into Excel spreadsheets for analysis for implementation exist and obstacles are so prevalent that unit!, issuers often do not always agree with the issuer after the and. 2023, select your location Close country language switcher areas of focus a comment letter its areas focus... Your firm have policies and procedures in place regarding the filing and proposed that. Please see www.deloitte.com/about to learn more social login not available on Microsoft browser. Reviewed appeared to be prepared in accordance with Division operating procedures server was provided to staff! Request this protection so prevalent that the unit is significantly impaired from implementing the supporting objective and delivery of CRS. Of outstanding staff have policies and procedures in place regarding the review, designated senior (. Participants ' views of how well they achieved the objectives management to review SEC is Includes only information related reviews.
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