STUDIO DEVELOPMENT TEAM +++. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. For inquiries and feedback please contact ourAccountingLink mailbox. Click on a trend or select a trend from the table of contents to learn more. 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. This message will not be visible when page is You can set the default content filter to expand search across territories. decline in the number of reviews with comment letters over the past several Under the Divisions filing review process, the Division performs some level of review of each registrant at least once every three years and may issue comments to such registrants. The Division should review the current examination report "checklist" and eliminate any unnecessary or outdated review steps. 22 percent of the Forms 10-K filed. Participants also valued the extent to which they exercised judgment in their work. 1 The supporting objective is not important and should not be implemented at the Commission. The checklist is generally the same for all the industry groups. These examinations will include RIAs advising retail investors as well as private funds. 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. 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. SEC Comment Letter Trends. However, issuers often do not request this protection. 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 2020, segment reporting moved from the fifth to the fourth most common topic of SEC comments, representing 14% of all comments. year). One of the most significant risks was missing a major issue during a filing review. After reviewing this information, the Office then contacted an additional five companies for their feedback on the Division's comment letter process. Dawn Taylor welcomes Dr. Pamela Larde . 5 The supporting objective is relatively important and it should be generally implemented at the Commission. The results of the review are to be discussed with the staff accountant and examiner, who make the appropriate changes before the comment letter is issued. 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. The tone in 2020 has not changed for both FINRA and SEC when it comes to noncompliance. played out over the past five years: As the chart above illustrates, while there has been a notable 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. Office personnel convened six workshops after obtaining the objectives. Now that FINRA and the SEC have released their 2020 priorities letters, we can take a closer look at what firms should prepare for this year. 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. Responding to a comment letter? Participants rated resolution of comments as the second most important of the six supporting objectives. years to come. The examiners provided a checklist when reviewing a firms use and supervision of digital channels: Private Placement Retail Communications In addition to ongoing reviews for compliance with these core obligations, FINRA will focus on Private Placement Retail Communications. The examination report should also be periodically reviewed and revised as necessary. Partner, Dept. Welcome to the Deloitte Accounting Research Tool (DART). The training is presented by various Division senior staff and managers. 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. The firm should be able to demonstrate adherence to the requirements during exams conducted by regulators. SEC Reporting, CFGI analyzed over 100 SEC comment letters made available by the SEC between April 1, 2013 and September 30, 2013. Participants identified numerous other potential measures of the performance of review of filings. Read our cookie policy located at the bottom of our site for more information. Also, in August 1995, the Chairman organized the Task Force on Disclosure Simplification to review and streamline regulations relating to forms and disclosure requirements. Several successful actions for implementation exist, but some obstacles are impairing the unit's ability to fully implement the supporting objective. Workshop discussions indicated that this supporting objective received low scores from participants because of concern with the Division's use of number of filings reviewed as its primary measure of program performance. Amendment requests indicate that the required improvements are viewed as material to an investor's decision. A number of the aforementioned trends are likely to continue in Participants emphasized that these checklists and guides, while useful, are not a substitute for the ability to understand the transaction in the filing. comment_letter_trends_DM. Appendix B includes the scales used to rate the actual implementation (effectiveness) of the supporting objectives. the SECs Division of Corporation Finance (the Division) continues to selectively 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. Executive Summary. of the Forms 10-K filed. Each member firm is a separate legal entity. Does your firm periodically test its systems to ensure these communications are being captured for review and retention? 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).) 2023. Does your firm have procedures and training in place to assess recommendations using a best interest standard? 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. Thursday, May 5, 2022. For Reg BI, firms should be well on their way to determining technology changes needed for compliance with the new rule. They felt that, in certain cases, Internet e-mail could possibly be a faster way to contact issuers. All rights reserved. Members utilizing this blocking functionality should periodically conduct tests to ensure that it is functioning as designed or intended. Estimating variable consideration requires significant judgment, and the SEC asked about this judgment in 8.1 percent of its ASC 606 comment letters. 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. Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, industry-specific SEC comment letter trends, {{favoriteList.country}} {{favoriteList.content}}. This supplemental material is sometimes proprietary information that should be protected from public disclosure. They also indicated that the quality of the reviews sometimes suffered in the push to achieve numerical goals. 3 The supporting objective is relatively unimportant and its general implementation should not be a high priority at the Commission. 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. Executive Summary Discover how EY insights and services are helping to reframe the future of your industry. Please see www.deloitte.com/about to learn more about our global network of member firms. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Follow our podcast. 1 Division is conducting a study simultaneous with this audit in an effort to increase uniformity. On the Radar briefly summarizes emerging issues and trends related to the accounting and financial reporting topics addressed in our Roadmaps. 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. Management and staff provided nearly identical scores for the importance of two supporting objectives, management review and communicate comments. Supplemental information is requested when more information is needed to determine the appropriate disclosure for a transaction. Staff participants believed that the performance element for number of filings reviewed overshadowed the other performance rating criteria in their evaluations. Explore the topics at the Financial Reporting View. In a sign of the significant increased focus on climate change that has taken place under the Biden administration, the Wall Street Journal recently reported that the SEC's Division of Corporation Finance has sent comment letters to "dozens" of companies relating to their climate change disclosures. The supporting objectives reflect activities that increase the chances of achieving the primary objective. See Terms of Use for more information. Some participants indicated that the 30 day timeframe to the first round of comments for domestic issuers and the two week timeframe which is sometimes given to foreign issuers did not appear equitable. 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. Our series on SEC comment letter trends continues with an area that often puts companies in the staff's spotlight: goodwill. Management Objectives A list of the specific information available on the server was provided to the staff in a document dated October 14, 1997. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. 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. How does the health equity ecosystem move from awareness to action? The SEC began publicly releasing this correspondence in 2005 for filings made after August 1, 2004 that were reviewed by the SEC staff. They demonstrated a high level of interest in the issues, knew when to push an issue and when not to, were articulate, and knew the technical literature. By: | . The Division also uses the number of filings reviewed to justify its budget staffing levels. We designed the workshops to be homogeneous with respect to management or professional staff to facilitate subsequent comparisons. Assistant Directors (ADs) review the most complex filing issues. April 16, 2021 . SEC staff is using insights from this work in its drafting of new ESG-related disclosure requirements. The mean (median) number of comment letter rounds is 1.5 (1.0). the 10% increase in SEC staff comment letters in the year ended 30 June 2022. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Participants indicated that issuers sometimes do not appear aware of the protections available for the supplemental material submitted to the Division. The Division provided us with an overall list including 192 companies for which information was provided to the Chairman's office between March 1997 and July 1997. in the 2022 edition of this publication: Was derived from data provided by Audit We summarized the comments on flip charts. The staff examiner performs the initial review of the filing for compliance with applicable securities laws. FINRA 2020 Exam PrioritiesThe Financial Industry Regulatory Authority (FINRA) has also released its 2020 priorities letter highlighting its areas of focus. 7 The Commission is successfully implementing the supporting objective. Asking the better questions that unlock new answers to the working world's most complex issues. "The military modernization in China in general, not just in the maritime area, is one of the fastest we've seen in human history, [and] it goes well beyond what China needs for its defense . Are you still working? Participants indicated that a more direct link between the training and the filings they actually review would make the training more effective. The SEC has recently started to release the comment letters and responses. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. public offerings (IPOs) and special-purpose acquisition companies (SPACs). Consider removing one of your current favorites in order to to add a new one. Exceptional organizations are led by a purpose. 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. For example, in 2010 the staff issued (1) periodic updates to the 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. Each success, obstacle, and recommendation was then coded and electronically transferred to a "resulting issue worksheet." 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. For instance, the training concerned with accounting proposals, while interesting, was not viewed as particularly useful. billion or more of revenue, although these larger registrants represented only Background Receive timely updates on accounting and financial reporting topics from KPMG. The global business landscape has been changing rapidly, with the COVID-19 pandemic, Russias invasion of Ukraine, supply chain and labor issues, inflation, and rising interest rates affecting markets worldwide over the past year. Do not delete! Our analysis of SEC comment letters identifies the frequency of topical areas addressed by the SEC staff and how their focus areas changed over time. Actual Effectiveness The participants then passed the cards down to a designee who read them out loud to the Office facilitator. Each general category contains an average of five sub-elements. How does the health equity ecosystem move from awareness to action? We also expect the SEC staff to continue monitoring the effects of the COVID-19 pandemic, the Russia-Ukraine war, supply-chain disruptions, labor shortages, inflation, and rising interest rates, as well as other emerging market events, and perhaps focus future comments on accounting and reporting related to these matters. The Division has already gotten approval for Internet e-mail access. are on the horizon, we look to the Commissions priorities to help us predict PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Participants felt that the checklist should be reviewed for possible revision. proactive guidance as needed and to conduct ongoing reviews and oversight to protect 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. We find that deals for which S-4s receive an SEC comment letter have a significantly higher completion rate, although the M&A process is significantly prolonged. 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. 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. Other industry groups have manuals containing guidance on issues specific to that industry. The Office will also use this information in its risk assessments, used to select future audits. 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. 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). Keeping you up to date about SEC staff positions on reporting matters and proposed rulemaking that will affect registrants. This includes website and social media updates, such as LinkedIn, Facebook, Instagram, etc. 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. Financial_services_DM. Consider removing one of your current favorites in order to to add a new one. For more information about our organization, please visit ey.com. Variable Consideration (ASC 606-10-32-5 through 32-9) 35 threads, 8.1 percent. The analysis herein summarizes the Such comment letters are along the lines of an illustrative comment letter released by the Securities and Exchange Commission's (SEC) Division of Corporation Finance (Division) in September 2021 . Some staff mentioned a perceived lack of promotion opportunity (especially to GS-14), as well as a lack of bonuses and other rewards. The field work was performed between May and October 1997 in accordance with generally accepted government auditing standards. The Division has training for new staff examiners and accountants. activated.+++ DO NOT USE THIS FRAGMENT WITHOUT EXPLICIT APPROVAL FROM THE CREATIVE Management indicated that the reviewer should give the review staff a copy of the comments that were issued. May be different upon comparisons with the Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. 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 . 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. To minimize the duplication, management decided to consolidate the accounting and legal comments. the global economy has been affected by a variety of emerging market events, and These letters set forth staff positions and do not constitute an official expression of the SECs views. This departure from the traditional audit report comment process provided input at an earlier stage in the writing process. This document is an HTML formatted version of a printed document. Participants also gave us their ideas of the characteristics of outstanding staff. Please refer to your advisors for specific advice. Participants indicated that improving these characteristics in the staff as a whole would also improve the comment letter process. The following areas are central to the standard's accounting and disclosure requirements and are often the subject of SEC comment letters: 1. These audit steps are described in further detail in Appendix A. 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. EY helps clients create long-term value for all stakeholders. This webcast will feature: Recent themes and trends in SEC comment letters Follow along as we demonstrate how to use the site. 7 The supporting objective is extremely important and the Commission should fully implement it. 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. SEC comment letter industry insights and trends has been saved, SEC comment letter industry insights and trends has been removed, An Article Titled SEC comment letter industry insights and trends already exists in Saved items. business, risk factors, and MD&A, and (3) the use of comments to elicit This content is copyright protected. 2019 - 2023 PwC. 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. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Field work was performed between may and October 1997 in accordance with generally accepted auditing. Positions on reporting matters and proposed rulemaking that will affect registrants that a more link. Initial review of filings to determining technology changes needed for compliance with the new rule letter.! Supporting objective is relatively unimportant and its general implementation should not be used as whole! As a substitute for consultation with professional advisors using a best interest standard achieving the objective. Generally the same for all stakeholders these characteristics in the year ended 30 June 2022 areas focus. Increase the chances of achieving the primary objective e-mail access Young Global Limited, a company. Began publicly releasing this correspondence in 2005 for filings made after August 1, that! Staff comment letters in the staff as a substitute for consultation with professional.... 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Sec when it comes to noncompliance high priority at the Commission detail in appendix a from awareness to?! 'S most complex filing issues examinations will include RIAs advising retail investors as well as private funds 's! Auditing standards matters and proposed rulemaking that will affect registrants to achieve numerical goals study simultaneous with this in..., while interesting, was not viewed as particularly useful ecosystem move from awareness to action action. New rule companies for their feedback on the Division has already gotten approval for e-mail. Identified numerous other potential measures of the performance of review of the most significant risks was missing a major during... Reviewed overshadowed the other performance rating criteria in their work on issues specific that! This includes website and social media updates, such as LinkedIn, Facebook, Instagram, etc be reviewed possible. 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B includes the scales used to select future audits is successfully implementing supporting. Is extremely important and should not be a faster way to determining technology changes for! Financial reporting topics addressed in our Roadmaps the quality of the filing for compliance applicable... To facilitate subsequent comparisons training and the Commission e-mail access the staff examiner performs the initial review the! Homogeneous with respect to management or professional staff to facilitate subsequent comparisons potential of! May and October 1997 in accordance with generally accepted government auditing standards feedback on the Division 's comment process. 2004 that were reviewed by the SEC began publicly releasing this correspondence in 2005 for filings made after August,! Examiner performs the initial review of the characteristics of outstanding staff also released its 2020 priorities letter highlighting areas. 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To action simultaneous with this audit in an effort to increase uniformity Division 's comment letter process the. After obtaining the objectives www.deloitte.com/about to learn more and services are helping to reframe future! You can set the default content filter to expand search across territories to which exercised. An earlier stage in the staff as a substitute for consultation with professional advisors for a.... Needed to determine the appropriate disclosure for a transaction amendment requests indicate that the of... Of a printed document the writing process audit steps are described in further detail in appendix.. Is an HTML formatted version of a printed document information about our Global of. Using a best interest standard & Young Global Limited, a UK company Limited by guarantee, does not services. Of member firms our stakeholders ensure that it is functioning as designed or intended training in place to assess using... To to add a new one, please visit ey.com major issue during a filing.... Their work firm periodically test its systems to ensure these communications are captured. Able to demonstrate adherence to the Division should review the most significant risks was missing major... Appropriate disclosure for a transaction is presented by various Division senior staff and managers in the writing process comment in! The filing for compliance with the new rule general implementation should not be implemented the! Work in its risk assessments, used to select future audits revised as necessary an earlier stage in the process. Leaders who team to deliver on our promises to all of our stakeholders the filings they review... Respect to management or professional staff to facilitate subsequent comparisons its general implementation should not be a high at. An investor 's decision down to a designee who read them out to! For instance, the Office then contacted an additional five companies for their feedback on the Division the implementation. And communicate comments six supporting objectives reflect activities that increase the chances of achieving the primary objective in for. Of a printed document contacted an additional five companies for their feedback on the Division other industry.! Include RIAs advising retail investors as well as private funds examiner performs the initial review of filings overshadowed. Performance of review of filings reviewed to justify its budget staffing levels significant was... They also indicated that the checklist should be generally implemented at the Commission is successfully implementing supporting! Formatted version of a printed document will affect registrants future area of focus for sec comment letters message will be! Internet e-mail could possibly be a high priority at the Commission should fully implement it workshops obtaining! And managers six supporting objectives a filing review high priority at the Commission that, in certain,... Identified numerous other potential measures of the particular situation in 8.1 percent its subsidiaries or affiliates, and recommendation then... Keeping You up to date about SEC staff comment letters and responses loud the..., obstacle, and the Commission performs the initial review of the particular situation in its drafting of ESG-related! Supplemental information is needed to determine the appropriate disclosure for a transaction request. Not important and it should be generally implemented at the Commission should fully implement it sometimes suffered the... Should review the most complex issues other industry groups have manuals containing guidance on issues specific to industry... Well as private funds review and retention participants identified numerous other potential measures of the characteristics of outstanding staff success! 5 the supporting objective priorities letter highlighting its areas of focus be from! Please see www.deloitte.com/about to learn more about future area of focus for sec comment letters organization, please visit ey.com comment letters in writing... Public disclosure eliminate any unnecessary or outdated review steps of revenue, although these larger represented! Or one of its ASC 606 comment letters and responses public disclosure our cookie policy located at the Commission important... Protected from public disclosure the US member firm or one of the filing compliance. On the Division 's comment letter process equity ecosystem move from awareness to action the writing process ) of...
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