The staffs comments are in response to a companys disclosure and other public information and are based on the staffs understanding of that companys facts and circumstances. It is for your own use only - do not redistribute. Background Keeping you up to date about SEC staff positions on reporting matters and proposed rulemaking that will affect registrants. Public comment letters relating to SEC rulemaking and regulatory actions are found in . Each workshop took from 4 to 6 hours to complete. 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. You can create keywords and key phrases to flag the risk of advisors using unauthorized communication channels. The Division also uses the number of filings reviewed to justify its budget staffing levels. One of the general categories include a sub-element regarding number of filings reviewed. This box/component contains code percent of reviews with comment letters were for registrants generating $1 The Office prepared the audit report. 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. result in increased focus and scrutiny from the SEC staff. Staff document and communicate findings from the review of disclosure filings to supervisors by means of an examination report and draft comments. EY | Assurance | Consulting | Strategy and Transactions | Tax. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. 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. 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. In these unprecedented times, the SEC continues to provide registrants with proactive guidance as needed and to conduct ongoing reviews and oversight to protect investors. Fullwidth SCC. Each success, obstacle, and recommendation was then coded and electronically transferred to a "resulting issue worksheet." Managers rated the importance of all of the supporting objectives slightly higher than did the staff. Our analysis of SEC comment letters identifies the frequency of topical areas addressed by the SEC staff and how their focus . Workshop participants anonymously rated how well the Division achieved each of its six supporting objectives. Management indicated that review of foreign filers was facilitated in an effort to encourage foreign issuers to register their securities with U.S. markets. The topics that constitute this years top 10 list are largely Variable Consideration (ASC 606-10-32-5 through 32-9) 35 threads, 8.1 percent. Read our best practices here: SEC comment letter trends for financial services companies. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Workshop participants agreed that the current process works well in resolving comments. In many instances, they had already recognized the issues and taken corrective actions. For inquiries and feedback please contact ourAccountingLink mailbox. 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 . Program performance measures are used to measure and evaluate the performance of the review of filings. Nave Bayesian classification identifies comment letters associated with future restatements and write-downs. Former San Antonio-area stock broker and investment adviser Matthew A. Data Evaluation 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. Registered representatives and customers use of an increasingly broad array of digital communication channels (e.g., texting, messaging, social media, collaboration applications) may pose challenges to a firms ability to comply with obligations related to the review and retention of such communications. 2022 Regulatory Roundup: Record-Breaking Penalties Provide a Glimpse Into 2023, Smarsh Advance Recap: Voice The Newest Frontier in Supervision, More Wall Street Sweeps Focus on Off-channel Communications, Our Top 5 Digital Communication Predictions for 2023. 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. A written list of steps, referred to during the workshops as a "checklist," guide the examination process. 3 tactical moves for oil and gas companies in 2023, Select your location Close country language switcher. Responding to a comment letter? In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. 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. Scope And Objectives The SEC began publicly releasing this correspondence in 2005 for filings made after August 1, 2004 that were reviewed by the SEC staff. Participants indicated that issuers sometimes do not appear aware of the protections available for the supplemental material submitted to the Division. decline in the number of reviews with comment letters over the past several rates, as well as other emerging market events, and perhaps focus future Management and staff provided nearly identical scores for the importance of two supporting objectives, management review and communicate comments. Anonymous. Several successful actions for implementation exist, but some obstacles are impairing the unit's ability to fully implement the supporting objective. May be different upon comparisons with the Please refer to your advisors for specific advice. In addition, during the current year, approximately 50% of reviews with comment letters were for registrants generating $1 billion or more of revenue, although these larger registrants represented only 22% of the Forms 10-K filed. Also, in August 1995, the Chairman organized the Task Force on Disclosure Simplification to review and streamline regulations relating to forms and disclosure requirements. Audit Results The Commission is currently seeking a contractor to modernize EDGAR. You can set the default content filter to expand search across territories. 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. Broker-dealer examinations will focus on issues relating to the preparation for and implementation of recent rulemaking, along with trading practices. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. 7 The supporting objective is extremely important and the Commission should fully implement it. At the beginning of the audit, the Office audit staff worked closely with management to develop concise objectives for the comment letter process. Resolve Comments - Gain issuer acceptance of comments through implementing amendments and futures comments. The questions gave structure to the discussions and facilitated the conduct of the workshops. Some participants felt that some reviewers change the comments on a filing, or insert new comments, without notifying them. Bloomberg. us SEC Comment Letter Trends. 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.). 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 companies regarding their climate-related disclosure or the absence of such disclosure. How do you move long-term value creation from ambition to action. The Commission received over 10,500 comments via form letters, another 3,200 comments from individuals, and over 900 comments from companies, NGOs, trade associations, and other organizations. Although issuers do not always agree with the Division's proposed changes, they generally still make them. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. All rights reserved. Amendment requests indicate that the required improvements are viewed as material to an investor's decision. comment_letter_trends_DM. Appendix B includes the scales used to rate the actual implementation (effectiveness) of the supporting objectives. the 10% increase in SEC staff comment letters in the year ended 30 June 2022. SEC Comment Letter Trends. The Division uses its comment letter process to communicate staff concerns and potential deficiencies to filers in order to improve disclosure. FINRA 2020 Exam PrioritiesThe Financial Industry Regulatory Authority (FINRA) has also released its 2020 priorities letter highlighting its areas of focus. This departure from the traditional audit report comment process provided input at an earlier stage in the writing process. Addressing SEC comment letters can be an arduous process. comment letter trends affecting SEC filers, see For inquiries and feedback please contact ourAccountingLink mailbox. The checklist is generally the same for all the industry groups. For more information about our organization, please visit ey.com. the global economy has been affected by a variety of emerging market events, and guidance related to MD&A and key performance indicators and metrics may Perhaps the most noteworthy finding was that combined management and staff scores indicated that communication of comments was the most important supporting objective and the supporting objective most successfully implemented. of the Forms 10-K filed. The Division should develop a guide for reviewers to use in reviewing examination reports. inflation, and rising interest rates affecting markets worldwide over the past year. Includes only information related to reviews The Workshops billion or more of revenue, although these larger registrants represented only addition, we expect the number of comments to grow next year because of a rise In addition, during the current year, approximately 50 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. 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 . 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. About 6.5% of the CTRs (1% of the overall sample) are related to Rule 406. Does your firm have policies and procedures to identify and address conflicts of interest? As a result of their review, they edit and add comments as appropriate. future area of focus for sec comment letters. In addition to issuing comment letters on registrants' SEC filings, the Division of Corporation Finance has continued to broadly increase its communications related to enhancing disclosures. }); Marianna Shafir, Regulatory Advisor at Smarsh, is responsible for regulatory affairs worldwide. These responses were generally consistent with responses from other issuer contacts the Division discussed with us. 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. In these unprecedented times, the SEC continues to provide registrants with investors. By: | . We also reviewed a list of 192 companies whose filings were reviewed by the Division and that were contacted by the Chairman of the Commission to obtain feedback on their experience with the Division's filing review process. 7 The Commission is successfully implementing the supporting objective. Issuers and staff often discuss filing issues over the telephone throughout the review process. Supplemental information is requested when more information is needed to determine the appropriate disclosure for a transaction. In other instances, issuers reduced their offering prices or withdrew their offers as a result of the Division's filing review and comment letter process. Applicability. Andrew Vollmer, Mercatus Center Policy Brief: Does the SEC Have Authority to Adopt Climate-Change Disclosure Rules?, at 13 (August 2021) (because "questions about the country's response to climate change" "are major and contentious policy areas," any SEC rules in this area "would be misusing general rulemaking powers that Congress provided" to the SEC); Letter to SEC . focus area of sec comment letters revenue recognition. These participants described instances where they were embarrassed when an issuer contacted them about a comment they knew nothing about, because the reviewer inserted it without their knowledge. All of the participants felt that their work made a difference and had an impact on the securities industry. 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. ttp://www.sec.gov/answers/commentletters.htm. 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. 5 The supporting objective is relatively important and it should be generally implemented at the Commission. Quantitative Analysis Prior to the workshops, each participant received a handbook that described expectations and encouraged them to think about the management objectives in advance. They met twice to discuss the issues and identify potential actions to enhance the comment letter process. We also reviewed reports of registrations filed between October 1, 1996 and June 31, 1997 (1,228 registrations receiving full reviews and 567 registrations receiving a monitor for one or more specific items) to determine the timeliness of the initial filing review comments. Consider removing one of your current favorites in order to to add a new one. The objectives selected for evaluation were those that management thought were both important and for which evaluation data would be useful. Management Review - Review the examination report and draft comments for policy considerations (e.g., materiality, uniformity). This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Pertains to 12-month periods ended July 31 These letters set forth staff positions and do not constitute an official expression of the SECs views. The checklist is a response to a prior General Accounting Office recommendation that the Division document its review of filings. OCIE also will continue to identify and examine SEC-registered firms engaged in the digital asset space, as well as RIAs that provide services to clients through automated investment tools and platforms (often referred to as robo-advisers). Key topics addressed in recently released SEC comment letters are discussed in a new Deloitte publication, "SEC Comment LettersIncluding Industry Insights: What 'Edgar' Told Us." The publication is the ninth edition in the firm's SEC Comment Letter series and includes extracts of frequently issued SEC staff comments, additional analysis and links to resources that are relevant to . The twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. Also, broader access to information on issues previously identified in a particular industry would also be helpful. Company name must be at least two characters long. 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. Rulemaking and regulatory actions are found in positions on reporting matters and proposed rulemaking that will affect.! 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