Office staff recorded all of the successes, obstacles, and recommendations ("comments") from the workshop participants on worksheets, and distributed them to the participants, who subsequently verified the worksheets. complied with the existing interpretive guidance. 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. An investor attention-based quantitative measure of importance, using EDGAR downloads, also predicts these outcomes. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. How does the health equity ecosystem move from awareness to action? How do you move long-term value creation from ambition to action. Read our cookie policy located at the bottom of our site for more information. The SECs office of compliance inspections and examinations (OCIE) released its 2020 exam priorities. priorities: For a comprehensive discussion of Less frequently, the SEC invites public comment on Final Rules, Interpretive Releases, and Policy . the global economy has been affected by a variety of emerging market events, and 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. Participants were asked to describe risks in the examination report/draft comment process. Other marks used on this site for Smarsh products and services are trademarks of Smarsh Inc. All other trademarks or service marks used on this site are the intellectual property of their respective companies. These letters set forth staff positions and do not constitute an official expression of the SECs views. In response, management indicated that accounting and legal comments were, at one time, presented separately in the comment letters. Use our Accounting Research Online website for financial reporting resources. Division performs some level of review of each registrant at least once every three A SPAC is a newly formed company that raises cash in an Some of the checklist items are seen as irrelevant and refer to issues that are no longer important. 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. Also, some reviewers are seen as not willing to discuss their review results with the staff. Management and staff also agreed that the Division is composed of, for the most part, hardworking, conscientious, highly qualified and motivated staff who are dedicated to improving disclosure to investors. The staff thought the objective was not being achieved; management rated it as generally being achieved although some obstacles impaired full implementation. Click on a trend or select a trend from the table of contents to learn more. For instance, the training concerned with accounting proposals, while interesting, was not viewed as particularly useful. In addition, they described a "collegial" atmosphere. As a result of their review, they edit and add comments as appropriate. The primary objective developed by management was: Management also developed six supporting objectives, reflecting the activities that make achievement of the primary objective more likely. At EY, our purpose is building a better working world. In turn, the Chairman contacted some of the companies for feedback on their experience with the Division's filing review process. After reviewing the information we contacted five companies not on the Division's list for their feedback on the Division's comment letter process. 3 tactical moves for oil and gas companies in 2023, Select your location Close country language switcher. 1 The Commission is not implementing the supporting objective in a meaningful manner. Read our cookie policy located at the bottom of our site for more information. topics of focus in the coming year. Comments may consist of requests for supplemental information, amendments to filings, or improvements in future filings (futures comments). Communicate Comments - Develop and communicate (written and verbal) comments to the issuers or their representatives. billion or more of revenue, although these larger registrants represented only The Securities and Exchange Commission's Office of Inspector General (Office) evaluated the Division of Corporation Finance's (Division) comment letter process. Executive Summary. The Task Force's recommendations have thus far resulted in elimination of forty-six rules and six forms. Participants felt that the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system should be improved to make it more useful in filing reviews. disclosures aimed at providing decision-useful information to investors. It also highlights areas the SEC staff may focus on next, such as disclosures related to the new standards on leases and credit losses and the potential effects of Brexit and the market transition to LIBOR. annual reporting cycle, they may find it helpful to consider the following SEC 22 percent of the Forms 10-K filed. All rights reserved. However, some duplication of comments occurred in categories that included both accounting and legal issues, such as in the Management's Discussion and Analysis (MD&A) section of the filing. We collected data primarily through six workshops (fifty-six staff or approximately 17% of Division personnel participated in the workshops). 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. However, issuers often do not request this protection. Change Disclosures. 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. investors. Dawn Taylor welcomes Dr. Pamela Larde . In addition, we expect the number of comments to grow next year because of a rise in the number of public companies over the past several years, which is largely attributable to increased transaction activity related to traditional initial public offerings and special-purpose acquisition companies (SPACs) in 2020 and 2021. Cultivating a sustainable and prosperous future, Real-world client stories of purpose and impact, Key opportunities, trends, and challenges, Go straight to smart with daily updates on your mobile device, See what's happening this week and the impact on your business. The facilitator then repeated the procedure to rate how important (or desirable) the participants thought the objective was. Each success, obstacle, and recommendation was then coded and electronically transferred to a "resulting issue worksheet." Broader SEC priorities often The twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. After reviewing this information, the Office contacted an additional five companies, not on the Division's list, for their feedback on the Division's comment letter process. 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. 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). The staff should then review what was issued and obtain any necessary explanations. 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. 5 The supporting objective is relatively important and it should be generally implemented at the Commission. Regulators are focusing on both Reg BI implementation and technology, so make sure not to miss the mark. Do your firm and your associated persons consider the express new elements of care, skill, and costs when making recommendations to retail customers? 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. _______________________, STAY CONNECTED For more information about our organization, please visit ey.com. us SEC Comment Letter Trends. By continuing to browse this site, you consent to the use of cookies. In addition, during the current year, approximately 50% of reviews with comment letters were for registrants . PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Communicate Staff Findings We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. This is a good time to review your policies and procedures to ensure the policies properly address the firms business activities and comply with the provisions of the recordkeeping rule. The questions gave structure to the discussions and facilitated the conduct of the workshops. Do your firm and your associated persons apply a best interest standard to recommendations of types of accounts? we expect that the Commission will continue to focus on how registrants have These keywords or key phrases can be customized to allow the firm to control which words or phrases are flagged and to adjust them as the business changes or new risks emerge. to continue monitoring the effects of the COVID-19 pandemic, the Russia-Ukraine Welcome to Viewpoint, the new platform that replaces Inform. Cybersecurity, strategy, risk, compliance and resilience, Value creation, preservation and recovery, Explore Transactions and corporate finance, Climate change and sustainability services, Strategy, transaction and transformation consulting, Real estate, hospitality and construction, How blockchain helped a gaming platform become a game changer, How to use IoT and data to transform the economics of a sport, M&A strategy helped a leading Nordic SaaS business grow. By continuing to browse this site, you consent to the use of cookies. In Division staff are now able to access the applicable guidance on-line. 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. In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. While it is difficult to predict what new comment letter trends 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. Senior and middle managers and support offices such as Chief Counsel and Chief Accountant should participate in training. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. 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. 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. 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. The standards include six general categories. 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. Sub-elements relating to the comment letter process are distributed throughout the six general categories. Partner, Dept. Consider removing one of your current favorites in order to to add a new one. Broker-dealer examinations will focus on issues relating to the preparation for and implementation of recent rulemaking, along with trading practices. companies. All rights reserved. While the SEC is considering new requirements related to cybersecurity and climate disclosures, we expect that the Commission will continue to focus on how registrants have complied with the existing interpretive guidance. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. The following areas are central to the standard's accounting and disclosure requirements and are often the subject of SEC comment letters: 1. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional . Recent SEC disclosure rules and interpretive 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. In-depth analysis, examples and insights to give you an advantage in understanding the requirements and implications of financial reporting issues. window.drift.on('ready', function () { Does your firm have policies and procedures in place regarding the filing, updating, and delivery of Form CRS. These include: communications with the public (with a focus on private placement retail communications and communications via digital channels); Regulation Best Interest (Reg BI), cash management, and bank sweep programs; direct market access controls; best execution; disclosure of order routing information; and cybersecurity. that have been closed and subsequently posted to EDGAR. Where possible, firms should block access to these email platforms through their networks. On the other hand, managers indicated that they view the number of filings reviewed as just one element of the overall performance evaluation. 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. However, despite these concerns, participants indicated they were proud to work for the Commission, in particular the Division. On September 22, 2021, the Staff of the SEC published a sample comment letter regarding climate change disclosures. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. (5) effectiveness of compliance programs. This document is an HTML formatted version of a printed document. 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. An outcome measure assesses the actual results, effects, or impact of a program activity compared to its intended purpose. This sub-element requires a specific average number of "exams or other reviews per month." Discover how EY insights and services are helping to reframe the future of your industry. 2023 Smarsh Inc. Smarsh and the Smarsh logo are registered trademarks of Smarsh Inc. in the United States. See how we connect, collaborate, and drive impact across various locations. 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). Generally, this task is delegated to senior accountants and examiners. (review years). Explore the topics at the Financial Reporting View. Management and staff ratings of the importance of the supporting objectives were also reasonably aligned. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. Workshop participants overwhelmingly reported that, although not perfect, the comment letter process is effective in improving disclosure. This also gave management a better understanding of the audit results, since they also analyzed the resulting issue worksheets. 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. The Division should review the role of futures comments to determine if there is any adverse impact on disclosure if there is no follow-up, and take appropriate action. 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. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. 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 . By: | . Audit Results Participants also gave us their ideas of the characteristics of outstanding staff. By Anonymous. The SEC has recently started to release the comment letters and responses. 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. [Appendix B contains the rating criteria used by the participants.] }); Marianna Shafir, Regulatory Advisor at Smarsh, is responsible for regulatory affairs worldwide. are on the horizon, we look to the Commissions priorities to help us predict This brought all comments about a particular issue together in one document and facilitated discussion and evaluation of the issues. Several participants suggested separating legal and accounting comments in the comment letter. While the SEC is Do Not Sell or Share My Personal Information. Welcome to the Deloitte Accounting Research Tool (DART). These materials were downloaded from PwC's Viewpoint (viewpoint.pwc.com) under license. proactive guidance as needed and to conduct ongoing reviews and oversight to protect

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