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. Each success, obstacle, and recommendation was then coded and electronically transferred to a "resulting issue worksheet." This also gave management a better understanding of the audit results, since they also analyzed the resulting issue worksheets. 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. Successful actions for implementation are predominate and obstacles, if any, do not interfere in the unit's basic ability to implement the supporting objective. Prior research on SEC comment letters has almost exclusively focused on reviews of periodic filings, such as 10-Ks. Participants also indicated that the result of their activities can be expressed better than relying solely on the number of filings reviewed.2 The Division has indicated that its reviews resulted in identification of novel and unique accounting issues, changes in industry practices, and changes in Generally Accepted Accounting Principles. Click on a trend or select a trend from the table of contents to learn more. The standards include six general categories. disclosures aimed at providing decision-useful information to investors. CEO survey: US CEOs brace for a recession of unknown magnitude. 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. The focus of our analysis related to the Financial Statements, footnotes and related disclosures made in Management's Discussion & Analysis filed on Form 10-Q and Form 10-K of companies with a market capitalization between $100 million and $1 billion. 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 comparisons included analysis of management versus staff, actual achievement versus importance, and opportunities for improvement. 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. 2023. Responding to a comment letter? Management and auditors discussed a number of examples of possible objectives in several joint meetings. played out over the past five years: As the chart above illustrates, while there has been a notable The Division works with the issuer to resolve the comments. They generally rated training on new releases as good. Exceptional organizations are led by a purpose. window.drift.on('ready', function () { Management revised their objectives further based on experience gained in the pilot workshop, which consisted of senior Division management. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Consider removing one of your current favorites in order to to add a new one. Smarsh provides marketing materials for informational purposes only, and such information should not be construed as legal advice or opinions. 6LinkedIn 8 Email Updates, Appendix A - Control Self Assessment Methodology. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. See how we connect, collaborate, and drive impact across various locations. 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). Subscribe to receive a monthly digest of articles exploring regulatory updates, news, trends and best practices in electronic communications capture and archiving. Resolve Comments 2019 - 2023 PwC. 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. Participants were asked to describe risks in the examination report/draft comment process. The primary objective developed by management was: Management also developed six supporting objectives, reflecting the activities that make achievement of the primary objective more likely. We then analyzed the ratings to determine the participants' views of how well they achieved the objectives. Supplemental information is requested when more information is needed to determine the appropriate disclosure for a transaction. 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). Select a section below and enter your search term, or to search all click The Office keyed the anonymous assessment ratings of the workshop participants into Excel spreadsheets for analysis. Overall Results Discover how EY insights and services are helping to reframe the future of your industry. By Anonymous. Sometimes the review staff changes or the workload becomes such that no time is available for follow up on futures comments. The primary objective of this audit was to evaluate how well the Division achieves its objectives with respect to the timeliness and effectiveness of the comment letter process. The Division has also indicated it has taken steps to reduce the burden on the filer. Heres how the numbers have played out over the past five years: As the chart above illustrates, while there has been a notable decline in the number of reviews with comment letters over the past several years, that trend reversed in review year 2022. Division staff are now able to access the applicable guidance on-line. 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. The Control Self Assessment (CSA) methodology used 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. Do your firm and your registered representatives guard against excessive trading, irrespective of whether the broker-dealer or associated person controls the account? rates, as well as other emerging market events, and perhaps focus future You may withdraw your consent at any time by emailing privacy@smarsh.com. 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. of the Forms 10-K filed. 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. EY | Assurance | Consulting | Strategy and Transactions | Tax. Asking the better questions that unlock new answers to the working world's most complex issues. 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. Some of the checklist items are seen as irrelevant and refer to issues that are no longer important. We Please seewww.pwc.com/structurefor further details. 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. These responses were generally consistent with responses from other issuer contacts the Division discussed with us. One of the questions generally posed by the SEC, Fox said, is why information included in a registrant's sustainability report is not included in its Form 10-K. "I believe that the SEC staff questioning of filings will really begin to bite. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. guidance related to MD&A and key performance indicators and metrics may 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. They also indicated that the quality of the reviews sometimes suffered in the push to achieve numerical goals. All rights reserved. The tone in 2020 has not changed for both FINRA and SEC when it comes to noncompliance. of Professional Practice, KPMG US. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. Also, participants have difficulty tracking issuer changes made to electronic filings in response to comments, especially in financial statements. 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. 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. business, risk factors, and MD&A, and (3) the use of comments to elicit All of the participants felt that their work made a difference and had an impact on the securities industry. This includes retention of electronic communications such as email, text messages, instant messages, social media, and collaboration tools. It is for your own use only - do not redistribute. and/or revise the labeling of your non-GAAP financial measures in future filings to adequately reflect what is being presented." (SEC Comment Letter to GGP Inc., (March 30, 2017).) More segment reporting comments in 2020. We collected two sets of ratings (i.e., actual and importance) for each of the objectives. Only three of the companies on the list raised issues concerning the Division's filing review process that resulted in a written response from the Division to the Chairman's office. The analysis herein summarizes the These audit steps are described in further detail in Appendix A. One of the general categories include a sub-element regarding number of filings reviewed. 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. Both management and staff gave low ratings to the achievement of the program performance measures objective (management - 3.90, staff - 3.32). EY helps clients create long-term value for all stakeholders. Heres how the numbers have decline in the number of reviews with comment letters over the past several Less frequently, the SEC invites public comment on Final Rules, Interpretive Releases, and Policy . FINRA 2020 Exam PrioritiesThe Financial Industry Regulatory Authority (FINRA) has also released its 2020 priorities letter highlighting its areas of focus. Unless noted otherwise, comment letter trend information referred to generally as filings). The field work was performed between May and October 1997 in accordance with generally accepted government auditing standards. EY helps clients create long-term value for all stakeholders. Staff Performance Measures - Evaluate staff performance in the comment letter process to improve individual and program performance. Their comments and the results of meetings to discuss the worksheets preceded the preparation of the audit report. During the filing review, the accountant and examiner maintain contact with the issuer for clarifications and additional information relating to the disclosures in the filing. 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. us SEC Comment Letter Trends. Participants felt that the checklist should be reviewed for possible revision. These outcomes of staff filing reviews were documented in "quantifiable benefits" memos. Explore the topics at the Financial Reporting View. KPMG does not provide legal advice. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. 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. 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 a result of their review, they edit and add comments as appropriate. Once the new standard goes into effect on June 30, 2020, FINRA will start examining firms actual compliance with Reg BI and its new customer relationship summary disclosures. Also, broader access to information on issues previously identified in a particular industry would also be helpful. This includes website and social media updates, such as LinkedIn, Facebook, Instagram, etc. Sample Letter to Companies Regarding Climate You can set the default content filter to expand search across territories. The comments are then faxed to the issuer. For inquiries and feedback please contact ourAccountingLink mailbox. 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 reversal of this long-term FINRA will also continue to review ongoing priorities such supervision, sales practice risks, anti-money laundering and fraud, insider trading, and manipulation across markets and products. comment_letter_trends_DM. Is related to reviews conducted by the 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 . 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 participants then passed the cards down to a designee who read them out loud to the Office facilitator. The SEC has recently started to release the comment letters and responses. Smarsh is a registered trademark of Smarsh Inc. in the European Union. The Task Force's recommendations have thus far resulted in elimination of forty-six rules and six forms. 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. Select a section below and enter your search term, or to search all click PwC. 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. Participants identified numerous other potential measures of the performance of review of filings. All rights reserved. Welcome to Viewpoint, the new platform that replaces Inform. CFGI analyzed 200 comments made by the SEC staff on companies' financial statements and disclosures, made in Management's Discussion & Analysis filed on Form 10-Q and Form 10-K. topics of focus in the coming year. Welcome to the Deloitte Accounting Research Tool (DART). Program Performance Measures - Measure and evaluate the performance of the comment letter process accurately. 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. 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. This message will not be visible when page is activated. One of the most significant risks was missing a major issue during a filing review. In addition, they described a "collegial" atmosphere. You can create keywords and key phrases to flag the risk of advisors using unauthorized communication channels. Assistant Directors (ADs) review the most complex filing issues. 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 . 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Develop outstanding leaders who team to deliver on our promises to all of our stakeholders legal! Released its 2020 priorities letter highlighting its areas of focus as good create long-term value for all stakeholders in. Communications such as LinkedIn, Facebook, Instagram, etc assurance and help clients,... That unlock new answers to the staff management 's contention that it uses the number of reviewed. All stakeholders Strategy and Transactions | Tax read them out loud to the Deloitte research... Also gave management a better understanding of the objectives consider removing one of your industry they described a `` issue! Noted otherwise, comment letter trend information referred to generally as filings ) a... Filing issues achieved the objectives checklist items are seen as irrelevant and refer to issues that no... Division discussed with US appropriate disclosure for a recession of unknown magnitude worksheets preceded the preparation of performance! 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