It also highlights areas the SEC staff may focus on next and summarizes best practices that may help companies respond to SEC staff comment letters. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Initially, the issuer communicates with the staff accountant and examiner. Areas of focus include: (2) cybersecurity policies and procedures, (4) adherence to fiduciary duty, including adequacy of disclosures, and. A written list of steps, referred to during the workshops as a "checklist," guide the examination process. This webcast will feature: Recent themes and trends in SEC comment letters jQuery('#chat').click(function(){ 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. Although issuers do not always agree with the Division's proposed changes, they generally still make them. Senior and middle managers and support offices such as Chief Counsel and Chief Accountant should participate in training. expanded disclosures related to emerging issues. Below are highlights of the FINRA 2020 priorities: Communications via Digital Channels An emerging focus for FINRA is digital communications. This box/component contains JavaScript that is needed on this page. Areas of focus include: (1) SEC registration eligibility, (2) cybersecurity policies and procedures, (3) marketing practices, (4) adherence to fiduciary duty, including adequacy of disclosures, and. The facilitator then repeated the procedure to rate how important (or desirable) the participants thought the objective was. Please see www.pwc.com/structure for further details. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Cybersecurity, strategy, risk, compliance and resilience, Value creation, preservation and recovery, Explore Transactions and corporate finance, Climate change and sustainability services, Strategy, transaction and transformation consulting, Real estate, hospitality and construction, How blockchain helped a gaming platform become a game changer, How to use IoT and data to transform the economics of a sport, M&A strategy helped a leading Nordic SaaS business grow. 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 . All rights reserved. The evaluation process based on these standards is intended to improve individual and staff performance, including performance in the comment letter process area. Currently, the two-week timeframe is only provided in unusual cases. result in increased focus and scrutiny from the SEC staff. At the beginning of the audit, the Office audit staff worked closely with management to develop concise objectives for the comment letter process. They also felt that the training manual was improved. The Division works with the issuer to resolve the comments. Amendment requests indicate that the required improvements are viewed as material to an investor's decision. KPMG does not provide legal advice. The Office facilitator recorded the rating for each participant on the flipchart. The Division has also indicated it has taken steps to reduce the burden on the filer. After completing the review, designated senior staff (reviewers) look over the filing and proposed comments. 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. Do your firm and your associated persons consider reasonably available alternatives to the recommendation? 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. Click on a trend or select a trend from the table of contents to learn more. that is needed on this page. The participants then passed the cards down to a designee who read them out loud to the Office facilitator. 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. Office personnel convened six workshops after obtaining the objectives. This content is copyright protected. The Office will also use this information in its risk assessments, used to select future audits. They thought the policy made it appear as if the foreign issuers were being "favored." 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. The supporting objectives reflect activities that increase the chances of achieving the primary objective. The Division should communicate to the staff management's contention that it uses the number of filings reviewed as only one staff performance measure. business, risk factors, and MD&A, and (3) the use of comments to elicit We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. Also, updates will be provided on-line. If your firm and your associated persons agree to provide account monitoring, do you apply the best interest standard to both explicit and implicit hold recommendations? 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. The participants agreed that, taken as a whole, the Division's comment letter process was achieving its primary objective to improve disclosure to investors. By Jeremy Simons. The Division uses its comment letter process to communicate staff concerns and potential deficiencies to filers in order to improve disclosure. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. It is for your own use only - do not redistribute. decline in the number of reviews with comment letters over the past several The Government Performance and Results Act of 1993 (GPRA) requires agencies to develop outcome-based performance measures to gauge progress toward goals. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. They met twice to discuss the issues and identify potential actions to enhance the comment letter process. In 2020, segment reporting moved from the fifth to the fourth most common topic of SEC comments, representing 14% of all comments. The Securities and Exchange Commission's Office of Inspector General (Office) evaluated the Division of Corporation Finance's (Division) comment letter process. trend may have resulted from (1) the SECs targeted review of climate-change Management Objectives The staff of the Division of Corporation Finance ("Staff") of the U.S. Securities and Exchange Commission ("SEC") published a sample comment letter on climate change disclosures on September 22, 2021. complied with the existing interpretive guidance. The Commission receives thousands of filings each year by issuers registering securities and submitting required reports and schedules. The Division periodically provided the Chairman of the SEC a list of companies with recently effective registrations. A number of the aforementioned trends are likely to continue in 6LinkedIn 8 Email Updates, Appendix A - Control Self Assessment Methodology. Please see www.pwc.com/structure for further details. EY helps clients create long-term value for all stakeholders. 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 . Some staff mentioned a perceived lack of promotion opportunity (especially to GS-14), as well as a lack of bonuses and other rewards. Do Not Sell or Share My Personal Information. Heres how the numbers have comments on accounting and reporting related to these matters. We bring together extraordinary people, like you, to build a better working world. Public comment letters relating to SEC rulemaking and regulatory actions are found in . Consider removing one of your current favorites in order to to add a new one. Applicability. Comments were received timely and the issuers were able to resolve their comments in time to execute their transactions. 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. Participants also valued the extent to which they exercised judgment in their work. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. 3 tactical moves for oil and gas companies in 2023, Select your location Close country language switcher. April 16, 2021 . 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. The SEC began publicly releasing this correspondence in 2005 for filings made after August 1, 2004 that were reviewed by the SEC staff. 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. Participants felt that the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system should be improved to make it more useful in filing reviews. ttp://www.sec.gov/answers/commentletters.htm. Follow along as we demonstrate how to use the site. 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. 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. How does the health equity ecosystem move from awareness to action? Audit Results The checklist is generally the same for all the industry groups. Analytics. Division performs some level of review of each registrant at least once every three 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. Over the past several years, the global economy has been affected by a variety of emerging market events, and the SEC staff often issued comments on these topics to request expanded disclosures aimed at providing decision-useful information to investors. Number of SEC comment letters by year . Asking the better questions that unlock new answers to the working world's most complex issues. The SECs office of compliance inspections and examinations (OCIE) released its 2020 exam priorities. FINRA 2020 Exam PrioritiesThe Financial Industry Regulatory Authority (FINRA) has also released its 2020 priorities letter highlighting its areas of focus. On September 22, 2021, the Division of Corporation Finance (Division) of the Securities and Exchange Commission (SEC) issued a sample comment letter to highlight its increased focus on climate change-related disclosures or the absence of such disclosures in issuer filings under the Securities Act and the Exchange Act. The twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. At the beginning of each workshop, a senior manager from the Division introduced the workshop and provided background information on their purpose. 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. 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. If the firm permits employees to communicate with customers through these systems or other non-firm email addresses, the firm is required to supervise and retain those communications. This departure from the traditional audit report comment process provided input at an earlier stage in the writing process. 1 Division is conducting a study simultaneous with this audit in an effort to increase uniformity. 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 growing number and complexity of cybersecurity risks facing investment advisers (IAs) have triggered an increased interest in cyber risk management by the SEC, including a planned sweep of more than 50 registered IAs and broker-dealers. referred to generally as filings). They felt that, in certain cases, Internet e-mail could possibly be a faster way to contact issuers. Explore the topics at the Financial Reporting View. Staff participants believed that the performance element for number of filings reviewed overshadowed the other performance rating criteria in their evaluations. This study examines the impact of SEC comment letters on future financial reporting outcomes and earnings credibility. Questionnaires are presented after each segment and at the end of the course to obtain feedback from the participants in an effort to continuously improve the program. 2019 - 2023 PwC. 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). Prior to the workshops, each participant received a handbook that described expectations and encouraged them to think about the management objectives in advance. This sample comment letter follows a recent increase in climate-related . Click on a trend or select a trend from the table of contents to learn more. The objectives selected for evaluation were those that management thought were both important and for which evaluation data would be useful. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. investors. priorities: For a comprehensive discussion of Smarsh handles information you submit to Smarsh in accordance with its Privacy Policy. By continuing to browse this site, you consent to the use of cookies. Comment Letters. in the number of public companies over the past several years, which is largely Copyright 2023 Deloitte Development LLC. EY | Assurance | Consulting | Strategy and Transactions | Tax. 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. Management revised their objectives further based on experience gained in the pilot workshop, which consisted of senior Division management. These responses were generally consistent with responses from other issuer contacts the Division discussed with us. We designed the workshops to be homogeneous with respect to management or professional staff to facilitate subsequent comparisons. 2021 edition of this publication because additional 2021 If appropriate, an issuer may also seek consideration from the Division's Office of Chief Accountant or from the Division Director. The applicable policy is dated August 19, 1997. 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 . The Commission is currently seeking a contractor to modernize EDGAR. Communicate Comments - Develop and communicate (written and verbal) comments to the issuers or their representatives. Division management and the Office staff reviewed the forty-two resulting issue worksheets. The Division uses its comment letter process to communicate staff concerns and potential deficiencies to filers in order to improve disclosure. However, review of filings and comments by reviewers mitigate this risk. Smarsh provides marketing materials for informational purposes only, and such information should not be construed as legal advice or opinions. For inquiries and feedback please contact ourAccountingLink mailbox. COVID-19 pandemic, Russias invasion of Ukraine, supply-chain and labor issues, We asked participants to review the worksheets relating to their workshop and verify their accuracy. 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 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. Does not include the SECs closing letter A SPAC is a newly formed company that raises cash in an Does your firm have procedures and training in place to assess recommendations using a best interest standard? Each member firm is a separate legal entity. Supplemental information is requested when more information is needed to determine the appropriate disclosure for a transaction. We 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. Issues that were considered material in some groups were not always considered material in other groups, or even from reviewer to reviewer.1 No written guidance has been developed for reviewers. Financial_services_DM. 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. And identify potential actions to enhance the comment letter process to communicate staff concerns and potential deficiencies to in. 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