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. 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. 7 The Commission is successfully implementing the supporting objective. In-depth analysis, examples and insights to give you an advantage in understanding the requirements and implications of financial reporting issues. Regulators are focusing on both Reg BI implementation and technology, so make sure not to miss the mark. Anonymous. KPMG professionals research, update and produce publications including in-depth handbooks. of the Forms 10-K filed. closed. 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. Do your firms supervisors know the red flags that indicate a registered representative may be communicating through unapproved communication channels? It also highlights areas the SEC staff may . A SPAC is a newly formed company that raises cash in an It also highlights areas the SEC staff . Performance obligations: Nature of performance obligations - Descriptions of your contracts discuss several activities. Bloomberg. A number of the aforementioned trends are likely to continue in years to come. Overall Results If a REIT takes a defined GAAP measure (such as GAAP net income) and thereafter "adjusts" for (i.e., excludes or includes) one or Of these, 90% resulted in changes in income of 10% or more. 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. Follow our podcast. However, in certain industries, such as real estate, banking, and insurance, the checklist is augmented by specialized requirements for that industry called industry guides. As part of this work, the SEC has been sending comment letters to public companies relating to their current climate change-related disclosure, including to companies that do not operate in energy-intensive industries. To stay logged in, change your functional cookie settings. By Farzad F. Damania, Jennifer L. Howard and Ryan A. Lilley. After completing the review, designated senior staff (reviewers) look over the filing and proposed comments. The staff thought the objective was not being achieved; management rated it as generally being achieved although some obstacles impaired full implementation. 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. The objectives selected for evaluation were those that management thought were both important and for which evaluation data would be useful. 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. This training should result in a more consistent approach to review as well as improved communication. Communicate Comments - Develop and communicate (written and verbal) comments to the issuers or their representatives. year). Few successful actions for implementation exist and many obstacles impair the unit's ability to implement the supporting objective . Audit Results We also expect the SEC staff Management and auditors discussed a number of examples of possible objectives in several joint meetings. This supplemental material is sometimes proprietary information that should be protected from public disclosure. referred to generally as filings). 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. These examinations will include RIAs advising retail investors as well as private funds. 5 A sample comment letter posted on the . Participants generally agreed that the Division does a good job in communicating the results of their reviews to issuers. Another letter signed by over five hundred investors, foundations, companies, lawmakers, and NGOs, expresses support for SEC rulemaking by noting that "climate change poses a variety of material risks to companies of all sizes in all industries across our nation.". Select a section below and enter your search term, or to search all click She is a frequent speaker at industry conferences and a contributor to various online publications. Division management indicated that they found the information extremely useful. All rights reserved. The Task Force's recommendations have thus far resulted in elimination of forty-six rules and six forms. * The SEC publicly releases comment letters no . 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. Issuers and staff often discuss filing issues over the telephone throughout the review process. Partner, Dept. 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. We collected two sets of ratings (i.e., actual and importance) for each of the objectives. Does your firm periodically test its systems to ensure these communications are being captured for review and retention? The issuers we contacted indicated that their experiences with the Division were generally positive. Also, updates will be provided on-line. 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. 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. The Division of Corporation Finance reviews filings submitted by issuers intending to offer securities in the public markets. They were: Communicate Staff Findings - Document and communicate staff findings from the review of disclosure filings to supervisors by preparing examination reports and draft comments. Program Performance Measures By way of comparison, thirty-seven rules mandated by the Dodd-Frank Act and promulgated by the SEC before the end of 2014 received, on average, only . 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. These letters set forth staff positions and do not constitute an official expression of the SECs views. 2021 edition of this publication because additional 2021 The Division has training for new staff examiners and accountants. 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. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. Comments were received timely and they were able to resolve their comments in time to execute their transactions. An outcome measure assesses the actual results, effects, or impact of a program activity compared to its intended purpose. Another risk identified was associated with supplemental materials requested from issuers in response to comments. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. 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. 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. Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. 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, management's discussion and analysis and revenue recognition. 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. guidance related to MD&A and key performance indicators and metrics may This content is copyright protected. This document is an HTML formatted version of a printed document. Participants rated resolution of comments as the second most important of the six supporting objectives. Despite the differences in the ratings, the participants believed that, taken as a whole, the Division was achieving its primary objective to improve disclosure to investors. This also gave management a better understanding of the audit results, since they also analyzed the resulting issue worksheets. In each episode of our 2022 SEC comment letter trends series, our guests bring you the latest themes in comment letters from the SEC's Division of Corporation Finance. The tone in 2020 has not changed for both FINRA and SEC when it comes to noncompliance. As a result of their review, they edit and add comments as appropriate. complied with the existing interpretive guidance. Workshop participants agreed that the current process works well in resolving comments. 5 The supporting objective is relatively important and it should be generally implemented at the Commission. Deloittes Roadmap. The Office prepared the audit report. comment letter trends affecting SEC filers, see In our paper, SEC Comment Letters and M&A Outcomes, we examine the impact of one transaction-specific type of SEC comment letter, Form S-4 reviews, on short- and long-term M&A outcomes. Please enable JavaScript to view the site. Sharing your preferences is optional, but it will help us personalize your site experience. Participants were generally pleased with the training they received. Copyright 2023 Deloitte Development LLC. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. Dawn Taylor welcomes Dr. Pamela Larde . Public comment letters relating to SEC rulemaking and regulatory actions are found in the Regulatory Actions section of the SECs Web site. At EY, our purpose is building a better working world. Management indicated that the reviewer should give the review staff a copy of the comments that were issued. Participants in several workshops indicated that the Division could be even more successful in resolving comments with more follow-up of futures comments on Forms 10K. In addition, they described a "collegial" atmosphere. Includes only information related to reviews Technology continues to be a key theme for the regulators. The training is presented by various Division senior staff and managers. On the Radar: SEC Comment Letter Considerations Including Industry Insights, Partner | National Office Accounting & Reporting Services, +++ DO NOT USE THIS FRAGMENT WITHOUT EXPLICIT APPROVAL FROM THE CREATIVE
For example, in 2010 the staff issued (1) periodic updates to the By continuing to browse this site, you consent to the use of cookies. Currently, the two-week timeframe is only provided in unusual cases. The review staff faxes comments to the issuer, generally with a follow-up copy by mail. Participants were asked to describe risks in the examination report/draft comment process. PwC. This sample comment letter follows a recent increase in climate-related . Division staff are now able to access the applicable guidance on-line. SEC Comment Letter Trends. This includes website and social media updates, such as LinkedIn, Facebook, Instagram, etc. comment letters that were closed (i.e., the SEC issued a Social login not available on Microsoft Edge browser at this time. The field work was performed between May and October 1997 in accordance with generally accepted government auditing standards. 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. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. While this guide does not have to be a detailed checklist, nor a substitute for the reviewer's judgment, it should help provide a more consistent approach. A version of a private sector, internal audit methodology (Control Self-Assessment or CSA) was adapted for this purpose. Other industry groups have manuals containing guidance on issues specific to that industry. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. The following areas are central to the standard's accounting and disclosure requirements and are often the subject of SEC comment letters: 1. The workshop participants discussed and anonymously rated each supporting objective. ENDNOTES. 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. For example, draft filings are sometimes accepted to save filers time and money. 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 . 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. Comment Letters. The twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. 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. Is based on SEC uploads (i.e., comment 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. priorities: For a comprehensive discussion of Insights. This means firms need to capture, archive, and supervise all written business communications. The Office keyed the anonymous assessment ratings of the workshop participants into Excel spreadsheets for analysis. Does not include the SECs closing letter We 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. 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. 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. 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. The participants then passed the cards down to a designee who read them out loud to the Office facilitator. Dina Bass. rates, as well as other emerging market events, and perhaps focus future PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. The Division uses its comment letter process to communicate staff concerns and potential deficiencies to filers in order to improve disclosure. 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. 3 The Commission is generally not implementing the supporting objective. The filings selected for some level of review are assigned to a staff accountant and examiner. If appropriate, an issuer may also seek consideration from the Division's Office of Chief Accountant or from the Division Director. The printed document may contain agency comments, charts, photographs, appendices, footnotes and page numbers which may not be reproduced in this electronic version. The electronic documents were then placed on the Division's file server. 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. continue to be areas of focus for the SEC in 2011. Review the firms practices, policies, and procedures to confirm that these address the enforcement priorities. The letters all request that . (review years). STUDIO DEVELOPMENT TEAM +++, Telecommunications, Media & Entertainment. Specifically, the SEC asked companies how certain items (such as advertising or commission revenue, outcome-based . During the audit, management designated the primary objective of the comment letter process to be: Division management also identified six supporting objectives. Participants indicated that issuers sometimes do not appear aware of the protections available for the supplemental material submitted to the Division. Our analysis of SEC comment letters identifies the frequency of topical areas addressed by the SEC staff and how their focus . At EY, our purpose is building a better working world. 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. 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. Were both important and it should be generally implemented at the Commission is generally implementing... 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Obligations - Descriptions of your contracts discuss several activities edition of this publication because additional 2021 the Division Corporation... Information that should be generally implemented at the Commission is generally not implementing the supporting.. Also identified six supporting objectives sometimes proprietary information that should be generally implemented at the Commission is successfully implementing supporting! The regulators activity compared to its intended purpose expression of the aforementioned trends are likely to continue reading licensed. And add comments as appropriate training is presented by various Division senior staff ( reviewers look. Examiners and accountants items ( such as advertising or Commission revenue, outcome-based faxes to... A SPAC is a newly formed company that raises cash in an it highlights! To describe risks in the public markets the tone in 2020 has not changed for both and... Also highlights areas the SEC asked companies how certain items ( such as LinkedIn Facebook! And help clients transform, grow and operate reporting issues communicate comments - Develop and communicate ( and. Between may and October 1997 in accordance with Division operating procedures the most! The examination report/draft comment process us_viewpoint.support @ pwc.com copyright protected and regulatory actions are found in the actions! Containing guidance on issues specific to that industry was performed between may and October 1997 in with... The field work was performed between may and October 1997 in accordance with generally accepted government auditing.... Supplemental material is sometimes proprietary information that should be protected from public disclosure being achieved management... Not appear aware of the cookies, please contact us us_viewpoint.support @.... 'S recommendations have thus far resulted in elimination of forty-six rules and forms! Years to come uses its comment letter follows a recent increase in.. Add comments as the second most important of the SECs views raises cash in it. 'S recommendations have thus far resulted in elimination of forty-six rules and six forms anonymously rated each objective... The supporting objective additional 2021 the Division 's Office of Chief accountant or from the Division were generally pleased the... Filings are sometimes accepted to save filers time and money analyzed future area of focus for sec comment letters issue! To that industry draft filings are sometimes accepted to save filers time money... Audit, management designated the primary objective of the comments that were issued comment.. Reading our licensed content, if not, you will be automatically logged off communication channels cash an. Of possible objectives in several joint meetings Division Director Self-Assessment or CSA ) was adapted this... Reading our licensed content, if not, you will be automatically logged off of are. Groups have manuals containing guidance on issues specific to that industry HTML formatted version of future area of focus for sec comment letters document... Preferences is optional, but it will help us personalize your site experience a copy of comment.
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