Most frequent comment areas The SEC staff continues to focus on many of the same topics that we highlighted last year. 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. 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). The table below summarizes comment letter trends by topic in the 12-month period ended July 31, 2022 (review year 2022 or the current year). expanded disclosures related to emerging issues. Also, broader access to information on issues previously identified in a particular industry would also be helpful. 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. future area of focus for sec comment letters. They thought the policy made it appear as if the foreign issuers were being "favored." The Division should remind issuers of the rules available to protect any proprietary supplemental information they provide to the Division and the procedures used to request the special handling. Division staff are now able to access the applicable guidance on-line. In these unprecedented times, the SEC continues to provide registrants with By: | . The Office will also use this information in its risk assessments, used to select future audits. A version of a private sector, internal audit methodology (Control Self-Assessment or CSA) was adapted for this purpose. An outcome measure assesses the actual results, effects, or impact of a program activity compared to its intended purpose. We Read our best practices here. Review the firms practices, policies, and procedures to confirm that these address the enforcement priorities. Audit Methodology 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? No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. 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. Amendment requests indicate that the required improvements are viewed as material to an investor's decision. You can set the default content filter to expand search across territories. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. A list of the specific information available on the server was provided to the staff in a document dated October 14, 1997. Workshop participants anonymously rated how well the Division achieved each of its six supporting objectives. 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. include registrant responses. The Division has already gotten approval for Internet e-mail access. Sample Letter to Companies Regarding Climate Anonymous. the SECs Division of Corporation Finance (the Division) continues to selectively PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. The Division converted its standard examination reports, internal division memoranda, staff manuals, legal bulletins, current issues, industry guides, and disclosure regulations to electronic form. Also, participants have difficulty tracking issuer changes made to electronic filings in response to comments, especially in financial statements. Municipal advisor examinations will include review of registration and continuing education requirements and municipal advisor fiduciary duty obligations to municipal entity clients. Firms cannot assume advisors arent using their personal emails to communicate with clients. Please see www.deloitte.com/about to learn more about our global network of member firms. Managers rated the importance of all of the supporting objectives slightly higher than did the staff. This means firms need to capture, archive, and supervise all written business communications. 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. See Terms of Use for more information. As a result, the staff, especially the newer staff, do not get the benefit of the learning experience from discussion of the reviewer's results. Division management indicated that they found the information extremely useful. A number of the aforementioned trends are likely to continue in Certain services may not be available to attest clients under the rules and regulations of public accounting. 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 participants then passed the cards down to a designee who read them out loud to the Office facilitator. FINRA 2020 Exam PrioritiesThe Financial Industry Regulatory Authority (FINRA) has also released its 2020 priorities letter highlighting its areas of focus. Investment company examinations will focus on mutual funds and exchange-traded funds, the activities of their RIAs, and the oversight practices of their boards of directors. 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. The global business landscape has been changing rapidly, with the Both management and staff gave low ratings to the achievement of the program performance measures objective (management - 3.90, staff - 3.32). COVID-19 pandemic, Russias invasion of Ukraine, supply-chain and labor issues, The checklist is a response to a prior General Accounting Office recommendation that the Division document its review of filings. Subscribe to receive a monthly digest of articles exploring regulatory updates, news, trends and best practices in electronic communications capture and archiving. 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. Division of Forms 10-K, 10-K/A, 10-Q, and 10-Q/A (which are 17 The number of SEC comment . 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. Participants identified numerous other potential measures of the performance of review of filings. Participants rated resolution of comments as the second most important of the six supporting objectives. CEO survey: US CEOs brace for a recession of unknown magnitude. These responses were generally consistent with responses from other issuer contacts the Division discussed with us. 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. reviews that are still ongoing or have recently been These responses were generally consistent with responses from other issuers that the Division provided to us. Insights. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Do Not Sell or Share My Personal Information. 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. Participants indicated that they tended to focus more on the activities by which they believed their performance was measured, and less on activities that were important but did not appear to them to affect their performance evaluations. Firms receiving comment letters from the SEC are more likely to restate financial statements (Adams et al., 2017;Cassell et al., 2013;Heese et al., 2017; Ryans, 2020). 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 test whether advisors are using unapproved communication channels, I recommend setting up automated keyword searches For example, the Smarsh Professional Archive has the ability to automatically flag emails that contain certain words or phrases likely to warrant review. The letters are limited to the specific facts of the filing in question and do not apply to other filings. This includes retention of electronic communications such as email, text messages, instant messages, social media, and collaboration tools. KPMG does not provide legal advice. public offerings (IPOs) and special-purpose acquisition companies (SPACs). Management Review - Review the examination report and draft comments for policy considerations (e.g., materiality, uniformity). 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. 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 . How do you move long-term value creation from ambition to action. In We use cookies to personalize content and to provide you with an improved user experience. Deloittes Roadmap. On the other hand, managers indicated that they view the number of filings reviewed as just one element of the overall performance evaluation. The reviewers review the examination report and draft comments prepared by the staff accountants and examiners to ensure that any material disclosure issues in the filing are identified. Participants indicated that issuers sometimes do not appear aware of the protections available for the supplemental material submitted to the Division. A written list of steps, referred to during the workshops as a "checklist," guide the examination process. The Division should design and implement formal training for reviewers. However, in certain industries, such as real estate, banking, and insurance, the checklist is augmented by specialized requirements for that industry called industry guides. The analysis herein summarizes the comments the Division issued during its reviews of periodic filings of public companies. Program Performance Measures - Measure and evaluate the performance of the comment letter process accurately. 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. Number of SEC comment letters by year . Participants also valued the extent to which they exercised judgment in their work. Prior to joining Smarsh, Marianna worked for BNY Mellon and Invesco where she was an instrumental member on compliance teams.Marianna has also served as an adjunct professor at New York Career Institute where she taught Law Office Management and Real Estate Law. Our analysis of SEC comment letters issued in relation to Form 10-K and Form 10-Q filings identifies the frequency of topical areas addressed by the SEC staff and how their focus areas changed over time. Follow our podcast. Approximately 19% of the comment letter conversations include a confidential treatment request from the firm to redact at least a portion of their response letter. 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. 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. All rights reserved. Our Thinking. If you require a printed version of this document contact the United States Securities and Exchange Commission, Office of Inspector General, Mail Stop 11-7, 450 Fifth Street N.W., Washington, D.C. 20549 or call (202) 942-4460. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. This message will not be visible when page is activated. After reviewing a filing, staff prepare an examination report summarizing the transaction and identifying any material disclosure issues. 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