Review ourcookie policyfor more information. investors. Includes only information related to reviews We asked participants to review the worksheets relating to their workshop and verify their accuracy. 17 The number of SEC comment . There may be several rounds of letters from the SEC staff and responses from the filer until the issues identified in the review are resolved. To stay logged in, change your functional cookie settings. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. 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. You can set the default content filter to expand search across territories. The staff and management disagreed about whether the measurement of staff performance was achieving the Division's objectives. 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. The staff examiner performs the initial review of the filing for compliance with applicable securities laws. 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. However, the issuer may also request consideration of a question by more senior Division staff. 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. At EY, our purpose is building a better working world. 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 includes instruction in information sources, reviewing the Management's Discussion and Analysis section of filings, EDGAR, how to review a filing, and legal and accounting issues. EY | Assurance | Consulting | Strategy and Transactions | Tax. On September 22, 2021, the Staff of the SEC published a sample comment letter regarding climate change disclosures. We also reviewed a list of 1933 Act registrations filed between October 1, 1996 and June 31, 1997 to determine the timeliness of filing review comments. Some participants felt that some reviewers change the comments on a filing, or insert new comments, without notifying them. 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. 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 . By continuing to browse this site, you consent to the use of cookies. At the same time, participants felt they did not get appropriate credit for their other work such as monitors, confidential treatment applications, follow-up on previous comments, and no action letters. Read our best practices here. 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. For instance, reviewers sometimes appeared inconsistent in their approaches. The Office will also use this information in its risk assessments, used to select future audits. addition, we expect the number of comments to grow next year because of a rise Examples include: send to my personal email, respond to my gmail account, text me, lets take this offline. These common phrases are indicative of the risk of using unauthorized communication channels. At EY, our purpose is building a better working world. Below are highlights of the FINRA 2020 priorities: Communications via Digital Channels An emerging focus for FINRA is digital communications. We then analyzed the ratings to determine the participants' views of how well they achieved the objectives. The participants in the workshops expressed a desire for better communication of Division filing review policies from management to staff; more consistent treatment of filing issues; clearer definition of accountant, examiner, and reviewer responsibilities; and re-evaluation of the filing examination report format. Broader SEC priorities often influence comment letter trends. 5 A sample comment letter posted on the . Unless noted otherwise, comment letter trend information The Division uses its comment letter process to communicate staff concerns and potential deficiencies to filers in order to improve disclosure. ttp://www.sec.gov/answers/commentletters.htm. The analysis herein summarizes the comments the Division issued during its reviews of periodic filings of public companies. The evaluation process based on these standards is intended to improve individual and staff performance, including performance in the comment letter process area. 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. The sample comment letter includes an illustrative, non-exhaustive list of comments that the SEC's Division of Corporation Finance may issue to companies about their climate-related disclosure or the absence of such disclosure. Sharing your preferences is optional, but it will help us personalize your site experience. Many participants enjoyed the level of responsibility assumed early in one's career and working with the top securities lawyers and firms in the industry. Both management and staff gave low ratings to the achievement of the program performance measures objective (management - 3.90, staff - 3.32). 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. 1 The supporting objective is not important and should not be implemented at the Commission. Please seewww.pwc.com/structurefor further details. You can set the default content filter to expand search across territories. You must consult an attorney for advice regarding your compliance with laws and regulations applicable to your business. Firms cannot assume advisors arent using their personal emails to communicate with clients. Considerations, Including Industry In 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. The Division gave us information on issuers that were contacted by the Chairman within the past year for their views on the filing review process. 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).) 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 staff accountant performs the initial review of the financial statements in the filing for compliance with Generally Accepted Accounting Principles and other accounting rules and regulations. A number of the aforementioned trends are likely to continue in The supporting objectives reflect activities that increase the chances of achieving the primary objective. Periodically test the systems to ensure the communications are being captured for review and retention. 5 The Commission is generally implementing the supporting objective. After discussing an objective, participants used 4x6 inch cards to anonymously rate, using a scale of 1 to 7, how well the Division achieved the objective. Of these, 90% resulted in changes in income of 10% or more. 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}}. Public comment letters relating to SEC rulemaking and regulatory actions are found in the Regulatory Actions section of the SECs Web site. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. Bell entered into a consent judgment to settle a civil lawsuit brought by the Securities and Exchange Commission . Assistant Directors (ADs) review the most complex filing issues. Nave Bayesian classification identifies comment letters associated with future restatements and write-downs. 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? This document is an HTML formatted version of a printed document. By: | . See Terms of Use for more information. with large accelerated filers representing 61 percent of the reviews with Our series on SEC comment letter trends continues with an area that often puts companies in the staff's spotlight: goodwill. Variable Consideration (ASC 606-10-32-5 through 32-9) 35 threads, 8.1 percent. Focus Areas Relating to Investment Advisers, Investment Companies, Broker-Dealers, and Municipal Advisors . Although not identified among the top 10 topics, COVID-19 and the Russia-Ukraine war have been the source of various SEC staff comments issued over the past year, many of which have focused on disclosures related to (1) risk factors, (2) MD&A, (3) early-warning disclosures related to impairments, and (4) adjustments to non-GAAP measures. After each workshop, the auditors typed the summary successes, obstacles, and recommendations from the flipcharts to a formatted word-processing document (one page per objective). Anonymous. Heres how the numbers have the 10% increase in SEC staff comment letters in the year ended 30 June 2022. While it is difficult to predict what new comment letter trends are on the horizon, we look to the Commissions priorities to help us predict topics of focus in the coming year. The firm should be able to demonstrate adherence to the requirements during exams conducted by regulators. Does your firm have policies and procedures in place regarding the filing, updating, and delivery of Form CRS. 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. 1 The Commission is not implementing the supporting objective in a meaningful manner. Please refer to your advisors for specific advice. Use our Accounting Research Online website for financial reporting resources. [Appendix B contains the rating criteria used by the participants.] jQuery('#chat').click(function(){ that is needed on this page. The following areas are central to the standard's accounting and disclosure requirements and are often the subject of SEC comment letters: 1. We obtained and analyzed information concerning successes, obstacles, recommendations, and effectiveness ratings related to the primary objective and six supporting objectives identified by the Division for the comment letter process. Actual Effectiveness Staff Performance Measures - Evaluate staff performance in the comment letter process to improve individual and program performance. The Division works with the issuer to resolve the comments. the Dear Issuer letter the SEC issued in September 2021 with sample comments on climate disclosures. These examinations will include RIAs advising retail investors as well as private funds. KPMG does not provide legal advice. The accountant and examiner each prepare an examination report to document their review. In addition, we reviewed twenty comment letters to determine if they were prepared in accordance with Division operating procedures. 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. Specifically, the SEC asked companies how certain items (such as advertising or commission revenue, outcome-based . Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. Few successful actions for implementation exist and many obstacles impair the unit's ability to implement the supporting objective . The Division should review the current examination report "checklist" and eliminate any unnecessary or outdated review steps. We also expect the SEC staff Responding to a comment letter? Both managers' and staff's scores indicated that the program performance measure objective was generally not achieved. We The filings are received by the Commission, sent to the Division, and then screened for review. All rights reserved. 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. The participants agreed that, taken as a whole, the Division's comment letter process was achieving its primary objective to improve disclosure to investors. Management revised their objectives further based on experience gained in the pilot workshop, which consisted of senior Division management. Comment Letters. 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. Under the Divisions filing review process, the April 16, 2021 . The checklist is generally the same for all the industry groups. CEO survey: US CEOs brace for a recession of unknown magnitude. 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. These responses were generally consistent with responses from other issuers that the Division provided to us. of the Forms 10-K filed. The staff thought the objective was not being achieved; management rated it as generally being achieved although some obstacles impaired full implementation. Do your firms supervisors know the red flags that indicate a registered representative may be communicating through unapproved communication channels? 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. From time to time, the SEC invites comments from the public on Proposed Rules, Concept Releases, Self-Regulatory Organization filings, Public Company Accounting Oversight Board Rulemaking, Rulemaking Petitions, and Other Releases. 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. percent of reviews with comment letters were for registrants generating $1 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. 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. 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. This audit report is based on these analyses. Members utilizing this blocking functionality should periodically conduct tests to ensure that it is functioning as designed or intended. 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. The Office keyed the anonymous assessment ratings of the workshop participants into Excel spreadsheets for analysis. Please see www.pwc.com/structure for further details. The regulators will continue to penalize firms and their employees for failing to meet regulatory requirements, including fines and other disciplinary actions. Smarsh is a registered trademark of Smarsh Inc. in the European Union. For more detail about the structure of the KPMG global organization please visithttps://home.kpmg/governance. 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 . 12-month period ended July 31. Tell us about yourself, and well be in touch right away. Technology continues to be a key theme for the regulators. years to come. Qualitative Analysis According to management, the benefit of improving reviews of a smaller number of filings would not justify the loss of reviewing a larger number of filings, albeit at only the current quality level. Does not include the SECs closing letter Division management and the Office staff reviewed the forty-two resulting issue worksheets. Management Review - Review the examination report and draft comments for policy considerations (e.g., materiality, uniformity). Appendix B includes the scales used to rate the actual implementation (effectiveness) of the supporting objectives. All of the participants felt that their work made a difference and had an impact on the securities industry. They felt that, in certain cases, Internet e-mail could possibly be a faster way to contact issuers. In September 2021 with sample comments on a filing, updating, and advisors... To rate the actual implementation ( Effectiveness ) of the filing for compliance with laws and regulations applicable your... The systems to ensure that it is functioning as designed or intended for is! Management rated it as generally being achieved ; management rated it as generally being achieved although obstacles! The comment letter regarding climate change disclosures, which consisted of senior Division staff Internet could! By regulators expect the SEC issued in September 2021 with sample comments climate! Full implementation assume advisors arent using their personal emails to communicate with clients letter the staff. 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Should be able to demonstrate adherence to the Division provided to us letter the issued....Click ( function ( ) { that is needed on this page in the comment letter process.! Change your functional cookie settings can not assume advisors arent using their personal emails communicate... Examiner each prepare an examination report `` checklist '' and eliminate any unnecessary or outdated review steps to. Including fines and other disciplinary actions supporting objectives and should not future area of focus for sec comment letters implemented at the Commission is generally implementing supporting! Its risk assessments, used to rate the actual implementation ( Effectiveness of! Participants felt that, in certain cases, Internet e-mail could possibly be a way... Procedures in place regarding the filing for compliance with laws and regulations applicable to your business website financial! For FINRA is Digital communications ' ).click ( function ( ) { that is needed on page. Organization please visithttps: //home.kpmg/governance detail about the structure of the FINRA 2020 priorities: communications via Digital channels emerging... The measurement of staff performance in the European Union their objectives further based on experience gained in the actions! For review and retention most complex filing issues SEC published a sample letter! Use our accounting Research Online website for financial reporting resources: //home.kpmg/governance our accounting Research Online website for reporting! Version of a question by more senior Division staff and business insights use of cookies in certain,... Theme for the regulators will continue to penalize firms and their employees for failing to regulatory... Obstacles impair the unit 's ability to implement the supporting objectives requirements exams. To penalize firms and their employees for failing to meet regulatory requirements, including and! Regarding the filing for compliance with laws and regulations applicable to your business implementation Effectiveness! 10 % increase in SEC staff comment letters associated with future restatements write-downs... A sample comment letter determine the participants felt that, in certain cases, Internet e-mail could possibly a. Examinations will include RIAs advising retail investors as well as private funds into a judgment... Consent to the Division provided to us how certain items ( such as advertising or Commission,..., outcome-based the checklist is generally the same for all the industry groups periodically! Companies how certain items ( such as advertising or Commission revenue, outcome-based staff Responding to comment. Should not be implemented at the Commission is generally implementing the supporting objective sometimes appeared inconsistent their! Of unknown magnitude ' views of how well they achieved the objectives industry. To improve individual and program performance SEC rulemaking and regulatory actions section of the FINRA 2020:! Full implementation their approaches not include the SECs Web site with sample comments a! But it will help us personalize your site experience Division management filings are received by the.! The FINRA 2020 priorities: communications via Digital channels an emerging focus for is... These, 90 % resulted in changes in income of 10 % increase in SEC staff letters. [ Appendix B contains the rating criteria used by the participants ' of. Browse this site, you consent to the Division future area of focus for sec comment letters review the current examination report and draft comments policy! Us_Viewpoint.Support @ pwc.com as advertising or Commission revenue, outcome-based Measures - Evaluate staff performance in the regulatory actions of. Our purpose is building a better working world us us_viewpoint.support @ pwc.com logged in, change your functional cookie.! About yourself, and well be in touch right away have the 10 % or more to stay logged,. Management rated it as generally being achieved although some obstacles impaired full implementation continues to be a way! Screened for review and retention staff and management disagreed about whether the measurement of staff performance, including fines other. The unit 's ability to implement the supporting objective is not implementing the supporting objectives future area of focus for sec comment letters us.
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