This webcast will feature: Recent themes and trends in SEC comment letters Although issuers do not always agree with the Division's proposed changes, they generally still make them. result in increased focus and scrutiny from the SEC staff. This audit report is based on these analyses. 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. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Do your firm and your registered representatives guard against excessive trading, irrespective of whether the broker-dealer or associated person controls the account? The Institute of Internal Auditors has promoted the concept internationally for the last several years with outstanding results reported. Management Objectives 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. 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.). 2023 Smarsh Inc. Smarsh and the Smarsh logo are registered trademarks of Smarsh Inc. in the United States. Broader SEC priorities often Anonymous. Our review results indicated that the Division issued comments within its 30 day timeframe on approximately 88% of the registrations in our sample receiving full reviews and approximately 98% of the registrations receiving a monitor for one or more specific items. Management reviews the examination report and draft comments for policy considerations such as materiality and uniformity with prior comments on similar issues. 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. 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. Certain services may not be available to attest clients under the rules and regulations of public accounting. ttp://www.sec.gov/answers/commentletters.htm. SEC Comment Letter Overall, managers assigned higher ratings than did the staff to the achievement of all but one of the supporting objectives. On September 22, 2021, in a step that emphasizes the SEC's increased focus on climate change disclosure, the SEC's Division of Corporation Finance ("Corp Fin") issued a sample letter for public companies containing comments illustrative of those that it may issue to companies "regarding their climate-related disclosure or the . 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. Amendment requests indicate that the required improvements are viewed as material to an investor's decision. 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. proactive guidance as needed and to conduct ongoing reviews and oversight to protect Click on a trend or select a trend from the table of contents to learn more. The Office facilitator recorded the rating for each participant on the flipchart. business, risk factors, and MD&A, and (3) the use of comments to elicit However, in certain industries, such as real estate, banking, and insurance, the checklist is augmented by specialized requirements for that industry called industry guides. It is for your own use only - do not redistribute. We also reviewed reports of 1933 Act 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. Participants felt that the review process could be enhanced with more communication between the staff and the reviewers. Staff Performance Measures, Appendix A - Control Self Assessment Methodology The letters all request that . By Farzad F. Damania, Jennifer L. Howard and Ryan A. Lilley. 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. Please see www.deloitte.com/about to learn more about our global network of member firms. influence comment letter trends. expanded disclosures related to emerging issues. Our series on SEC comment letter trends continues with an area that often puts companies in the staff's spotlight: goodwill. 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. 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. OCIE notes that the positive impact of effective compliance is clear from the exams it has conducted.The OCIE 2020 priorities include the following critical areas: Financial Technology (Fintech) and Innovation, Including Digital Assets and Electronic Investment Advice OCIE recognizes that advancements in financial technologies, methods of capital formation and market structures, and registered firms use of new sources of data (often referred to as alternative data) warrant ongoing attention and review. The applicable policy is dated August 19, 1997. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. to continue monitoring the effects of the COVID-19 pandemic, the Russia-Ukraine SEC staff from the Divisions of Corporation Finance and Investment Management issue this type of comment letter in connection with their review of disclosure filings. A key element to stay ahead of the curve is to develop a sound understanding of financial reporting trends. Participants also gave us their ideas of the characteristics of outstanding staff. In September 2021, the Securities and Exchange Commission (SEC) provided a sample comment letter that included nine potential climate-related comments the SEC may issue to . Communicate Comments 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. Background At the beginning of each workshop, a senior manager from the Division introduced the workshop and provided background information on their purpose. 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. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. The analysis herein summarizes the comments the Division issued during its reviews of periodic filings of public companies. Financial_services_DM. Are your firms supervisors following up on such red flags, which include, but are not limited to: email chains that include non-approved email addresses for registered representatives; references in emails to communications with a registered representative that occurred outside approved firm channels; or. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. attributable to increased transaction activity related to traditional initial Dawn Taylor welcomes Dr. Pamela Larde . Copyright 2023 Deloitte Development LLC. Each general category contains an average of five sub-elements. The Division has already gotten approval for Internet e-mail access. 7 The supporting objective is extremely important and the Commission should fully implement it. At EY, our purpose is building a better working world. Comments may consist of requests for supplemental information, amendments to filings, or improvements in future filings (futures comments). Firms cannot assume advisors arent using their personal emails to communicate with clients. All rights reserved. This includes retention of electronic communications such as email, text messages, instant messages, social media, and collaboration tools. How do you move long-term value creation from ambition to action. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. They were: Management Review - Review the examination report/draft comments for policy considerations (e.g., materiality, uniformity). Successful actions for implementation are predominate and obstacles, if any, do not interfere in the unit's basic ability to implement the supporting objective. The insights and services we provide help to create long-term value for clients, people and society, and to build trust in the capital markets. Our internal subject matter experts and our network of external industry experts are featured with insights into the technology and industry trends that affect your electronic communications compliance initiatives. The Division uses its comment letter process to communicate staff concerns and potential deficiencies to filers in order to improve disclosure. focus area of sec comment letters revenue recognition. One of the most significant risks was missing a major issue during a filing review. 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 . Asking the better questions that unlock new answers to the working world's most complex issues. Nave Bayesian classification identifies comment letters associated with future restatements and write-downs. Communicate Staff Findings DTTL (also referred to as "Deloitte Global") does not provide services to clients. Performance obligations: Nature of performance obligations - Descriptions of your contracts discuss several activities. This content is copyright protected. 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. This message will not be visible when page is
Select a section below and enter your search term, or to search all click Participants indicated that they tended to focus more on the activities by which they believed their performance was measured, and less on activities that were important but did not appear to them to affect their performance evaluations. Managers rated the importance of all of the supporting objectives slightly higher than did the staff. 4. Division of Forms 10-K, 10-K/A, 10-Q, and 10-Q/A (which are FINRA included a checklist of what examiners will be looking for after Reg BI goes into effect: Firms should consult this years priorities letters to better assess their compliance with relevant requirements and regulators expectations. 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. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. The examination report should also be periodically reviewed and revised as necessary. 12-month period ended July 31, 2022 (review year 2022 or the current The global business landscape has been changing rapidly, with the Publication date: 30 Jun 2022. us SEC Comment Letter Trends. Participants identified numerous other potential measures of the performance of review of filings. comments the Division issued during its reviews of periodic filings of public You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website. Subscribe to receive Roadmap series publications via email. These factors are crucial to an effective program. The SEC began publicly releasing this correspondence in 2005 for filings made after August 1, 2004 that were reviewed by the SEC staff. She earned her Juris Doctorate from Nova Southeastern University. 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. Does not include the SECs closing letter A list of the specific information available on the server was provided to the staff in a document dated October 14, 1997. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Do Not Sell or Share My Personal Information. Smarsh is a registered trademark of Smarsh Inc. in the European Union. They also felt that the training manual was improved. It also highlights areas the SEC staff . The SEC continues to prioritize reviews of larger companies, with large, accelerated filers representing 61% of the reviews with comment letters in the current year even though they represented only 31% of the Forms 10-K filed. the 10% increase in SEC staff comment letters in the year ended 30 June 2022. OCIE prefaces the 2020 priorities by emphasizing the vital importance of compliance programs and compliance professionals. Similarly, California Attorney General Rob Bonta argues that climate risk . 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. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. Insights. 3 tactical moves for oil and gas companies in 2023, Select your location Close country language switcher. In 2016, the percentage of comment letters issued to unique companies addressing a non-GAAP metric spiked to 35%, even as the total number of comment letters was declining, indicating non-GAAP was an area of focus for the SEC. 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. In this webcast, KPMG professionals discuss recent themes and trends in comment letter activity from the SEC and what areas of focus may be on the horizon. We asked participants to review the worksheets relating to their workshop and verify their accuracy. Thursday, May 5, 2022. Also, broader access to information on issues previously identified in a particular industry would also be helpful. Sample Letter to Companies Regarding Climate Participants felt that outstanding staff not only reviewed a lot of filings, but also saw the larger issues in a filing, the impact of their comments on those issues, and knew how to proceed appropriately. Number of SEC comment letters by year . The Division communicates its comments to the issuer after the filing review to obtain appropriate improvements in disclosure. Estimating variable consideration requires significant judgment, and the SEC asked about this judgment in 8.1 percent of its ASC 606 comment letters. Several successful actions for implementation exist, but some obstacles are impairing the unit's ability to fully implement the supporting objective. The analysis herein summarizes the Content Warning: References to stealthing, rape, toxic relationships, emotional abuse, inflicted trauma, and suicide. 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. In-depth analysis, examples and insights to give you an advantage in understanding the requirements and implications of financial reporting issues.
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