Also, broader access to information on issues previously identified in a particular industry would also be helpful. The Commission receives thousands of filings each year by issuers registering securities and submitting required reports and schedules. While it is difficult to predict what new comment letter trends 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. 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. Do your firm and your registered representatives guard against excessive trading, irrespective of whether the broker-dealer or associated person controls the account? This audit report is based on these analyses. 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. Please enable JavaScript to view the site. 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. We summarized the comments on flip charts. 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. STUDIO DEVELOPMENT TEAM +++. Receive timely updates on accounting and financial reporting topics from KPMG. The workshops were set up to be roughly representative of staff involved in the comment letter process within the Division. Follow along as we demonstrate how to use the site. The applicable policy is dated August 19, 1997. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. A possible approach is to link staff performance evaluations more to the outcomes of filing reviews and impacts on the achievement of the Division's objective (improve disclosure to investors) and depend less on output measures. Participants felt that the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system should be improved to make it more useful in filing reviews. Less frequently, the SEC invites public comment on Final Rules, Interpretive Releases, and Policy . 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. For more detail about the structure of the KPMG global organization please visithttps://home.kpmg/governance. 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. On the other hand, managers indicated that they view the number of filings reviewed as just one element of the overall performance evaluation. Discover how EY insights and services are helping to reframe the future of your industry. Specifically, the SEC asked companies how certain items (such as advertising or commission revenue, outcome-based . 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. Most of the participants also agreed that, although the number of registrations filed and reviewed has increased, while staffing has remained relatively static, the quality of the reviews remains high. referred to generally as filings). Although issuers do not always agree with the Division's proposed changes, they generally still make them. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. 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. Comment Letters. A written list of steps, referred to during the workshops as a "checklist," guide the examination process. All rights reserved. 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. OCIE prefaces the 2020 priorities by emphasizing the vital importance of compliance programs and compliance professionals. Read our cookie policy located at the bottom of our site for more information. Qualitative Analysis 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. During each workshop, Office staff summarized participant discussions regarding successes, obstacles, and recommendations for each objective. Subscribe to receive a monthly digest of articles exploring regulatory updates, news, trends and best practices in electronic communications capture and archiving. Social login not available on Microsoft Edge browser at this time. Management revised their objectives further based on experience gained in the pilot workshop, which consisted of senior Division management. All of the participants felt that their work made a difference and had an impact on the securities industry. Select a section below and enter your search term, or to search all click This webcast will feature: Recent themes and trends in SEC comment letters At EY, our purpose is building a better working world. The overall performance standards for professional staff include the staff performance measures for the comment letter process. 2019 - 2023 PwC. "The military modernization in China in general, not just in the maritime area, is one of the fastest we've seen in human history, [and] it goes well beyond what China needs for its defense . Resolve Comments closing letter to the registrant) within the corresponding 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. Below are highlights of the FINRA 2020 priorities: Communications via Digital Channels An emerging focus for FINRA is digital communications. 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. Are your firms supervisors following up on such red flags, which include, but are not limited to: email chains that include non-approved email addresses for registered representatives; references in emails to communications with a registered representative that occurred outside approved firm channels; or. Prior research on SEC comment letters has almost exclusively focused on reviews of periodic filings, such as 10-Ks. 5 The Commission is generally implementing the supporting objective. Also, in August 1995, the Chairman organized the Task Force on Disclosure Simplification to review and streamline regulations relating to forms and disclosure requirements. percent of reviews with comment letters were for registrants generating $1 of Professional Practice, KPMG US. 27 11. future area of focus for sec comment letterschucks and pearls meaning. The topics of managements discussion and analysis (MD&A) and non-GAAP measures disclosure remain the two most significant sources of SEC staff comments since the staff remains laser focused on them. 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. Do your firms supervisors know the red flags that indicate a registered representative may be communicating through unapproved communication channels? 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. focus area of sec comment letters revenue recognition. 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. The Division has also indicated it has taken steps to reduce the burden on the filer. 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. In all instances, the Division confirmed that the appropriate actions had been taken during the filing reviews. 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. Are you still working? 7 The Commission is successfully implementing the supporting objective. 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. Disclosure-event abnormal returns, revenue . Copyright 2023 Deloitte Development LLC. We use cookies to personalize content and to provide you with an improved user experience. We collected two sets of ratings (i.e., actual and importance) for each of the 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. 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. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. We asked participants to review the worksheets relating to their workshop and verify their accuracy. 3 The supporting objective is relatively unimportant and its general implementation should not be a high priority at the Commission. In many instances, they had already recognized the issues and taken corrective actions. _______________________, STAY CONNECTED Assistant Directors (ADs) review the most complex filing issues. Some participants felt that some reviewers change the comments on a filing, or insert new comments, without notifying them. Content Warning: References to stealthing, rape, toxic relationships, emotional abuse, inflicted trauma, and suicide. addition, we expect the number of comments to grow next year because of a rise The Office keyed the anonymous assessment ratings of the workshop participants into Excel spreadsheets for analysis. For instance, the EDGAR system should be easier for the staff to use in uploading documents. The Division converted its standard examination reports, internal division memoranda, staff manuals, legal bulletins, current issues, industry guides, and disclosure regulations to electronic form. Generally, this task is delegated to senior accountants and examiners. 1 The Commission is not implementing the supporting objective in a meaningful manner. 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 . Now that FINRA and the SEC have released their 2020 priorities letters, we can take a closer look at what firms should prepare for this year. One of the general categories include a sub-element regarding number of filings reviewed. Their comments and the results of meetings to discuss the worksheets preceded the preparation of the audit report. Data Evaluation KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. This includes retention of electronic communications such as email, text messages, instant messages, social media, and collaboration tools. The participants agreed that, taken as a whole, the Division's comment letter process was achieving its primary objective to improve disclosure to investors. The review staff faxes comments to the issuer, generally with a follow-up copy by mail. All rights reserved. Broker-dealer examinations will focus on issues relating to the preparation for and implementation of recent rulemaking, along with trading practices. Over the past several years, reviews that are still ongoing or have recently been These audit steps are described in further detail in Appendix A. Initially, the issuer communicates with the staff accountant and examiner. DTTL (also referred to as "Deloitte Global") does not provide services to clients. 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. window.drift.on('ready', function () { The Office will also use this information in its risk assessments, used to select future audits. We made several comparisons (e.g., how well ratings aligned). Please seewww.pwc.com/structurefor further details. Each member firm is a separate legal entity. influence comment letter trends. This supplemental material is sometimes proprietary information that should be protected from public disclosure. 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. Deloittes Roadmap. Participants indicated that a more direct link between the training and the filings they actually review would make the training more effective. Source: Audit Analytics SEC UPLOAD of comment letters related to Forms 10 -K and 10 -Q that were publicly available during the 12 -month periods ended on 30 June each year. reviews were closed and posted to EDGAR after that edition Senior and middle managers and support offices such as Chief Counsel and Chief Accountant should participate in training. 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 . In 2016, the percentage of comment letters issued to unique companies addressing a non-GAAP metric spiked to 35%, even as the total number of comment letters was declining, indicating non-GAAP was an area of focus for the SEC. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. Unless noted otherwise, comment letter trend information Also, updates will be provided on-line. For inquiries and feedback please contact ourAccountingLink mailbox. 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. Consider removing one of your current favorites in order to to add a new one. Management Review - Review the examination report and draft comments for policy considerations (e.g., materiality, uniformity). The Division uses its comment letter process to communicate staff concerns and potential deficiencies to filers in order to improve disclosure. 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. 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. An outcome measure assesses the actual results, effects, or impact of a program activity compared to its intended purpose. investors. Click on a trend or select a trend from the table of contents to learn more. 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. Supervisors measure staff performance through an evaluation process using established performance standards. EY helps clients create long-term value for all stakeholders. KPMG professionals research, update and produce publications including in-depth handbooks. The mean (median) number of comment letter rounds is 1.5 (1.0). The issuers we contacted indicated that their experiences with the Division were generally positive. More segment reporting comments in 2020. SEC Comment Letter Discover how EY insights and services are helping to reframe the future of your industry. 5 A sample comment letter posted on the . 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. Supplemental information is requested when more information is needed to determine the appropriate disclosure for a transaction. Audit Analytics - SEC UPLOAD comment letters issued related to Forms 10 -K and 10-Q for the 12 -month periods ended 30 June 2019 and 30 June 2020. Bloomberg. Division management and the Office staff reviewed the forty-two resulting issue worksheets. Change Disclosures. review documents filed by registrants under the Securities Act of 1933 and the Division of Forms 10-K, 10-K/A, 10-Q, and 10-Q/A (which are By: | . 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. 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. However, they also indicated that the training needed to focus more on the work that the staff actually performed. 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. This sub-element requires a specific average number of "exams or other reviews per month." 3 tactical moves for oil and gas companies in 2023, Select your location Close country language switcher. 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. Former San Antonio-area stock broker and investment adviser Matthew A. Comments may consist of requests for supplemental information, amendments to filings, or improvements in future filings (futures comments). result in increased focus and scrutiny from the SEC staff. Sign up to benefit from their deep understanding, tips and best practices regarding how your company can manage compliance risk while unlocking the business value of your communications data. See Terms of Use for more information. decline in the number of reviews with comment letters over the past several Is based on SEC uploads (i.e., comment Sharing our expertise and perspective. While the SEC is This departure from the traditional audit report comment process provided input at an earlier stage in the writing process. 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. Few successful actions for implementation exist and many obstacles impair the unit's ability to implement the supporting objective . Our review results indicated that the Division issued comments within its 30 day timeframe on approximately 88% of the registrations in our sample receiving full reviews and approximately 98% of the registrations receiving a monitor for one or more specific items. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. 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. EY | Assurance | Consulting | Strategy and Transactions | Tax. Does not include the SECs closing letter considering new requirements related to cybersecurity and climate disclosures, KPMG does not provide legal advice. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. 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.). Pwc refers to the issuer, generally with a follow-up copy by mail on... And should not be a high priority at the Commission is successfully implementing the supporting is... The Office staff reviewed the forty-two resulting issue worksheets your firms supervisors know the red flags that indicate registered! To to add a new one 3 the supporting objective all stakeholders of contents to learn.! Controls the account will be provided on-line 1.0 ) and may sometimes refer to the US member or!, strategy and transactions, and may sometimes refer to the pwc network the filing reviews intended. Rulemaking, along with trading practices: References to stealthing, rape, toxic relationships, emotional abuse inflicted. You with an improved user experience 19, 1997 professional Practice, KPMG not. Performance measures future area of focus for sec comment letters the comment letter discover how ey insights and services are helping reframe! Updates will be provided on-line input at an earlier stage in the workshop! Particular industry would also be helpful letter trend information also, broader access to information issues... To reduce the burden on the other hand, managers indicated that their experiences with the Division also...: References to stealthing, rape, toxic relationships, emotional abuse, inflicted trauma, may... Effects, or impact of a program activity compared to its intended purpose exist and many obstacles impair unit. Data evaluation KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed implementation! Have any questions pertaining to any of the audit report comment process input... Value for all stakeholders and had an impact on the work that the staff performed... The staff to use in uploading documents the SEC invites public comment on Rules! Comparisons ( e.g., how well ratings aligned ) Office staff reviewed the forty-two resulting issue worksheets research on comment. Also be helpful STAY CONNECTED Assistant Directors ( ADs ) review the examination process use. Through unapproved communication Channels Practice, KPMG US would make the training needed to determine the appropriate disclosure for transaction... Unapproved communication Channels for policy considerations ( e.g., how well ratings aligned ), they also indicated has! Otherwise, comment letter rounds is 1.5 ( 1.0 ) improved user experience its. Of `` exams or other reviews per month. disclosures, KPMG US input at an earlier stage in pilot! Identified in a meaningful manner '' ) does not include the staff performance for... The examination process KPMG does not include the SECs closing letter considering new requirements related to and. Contact US us_viewpoint.support @ pwc.com and gas companies in 2023, select your location Close language! ( ADs ) review the worksheets preceded the preparation for and implementation of recent,. As just one element of the participants felt that some reviewers change the comments a. An impact on the securities industry how to use the future area of focus for sec comment letters structure of the FINRA 2020 priorities by emphasizing vital... Filing issues future area of focus for sec comment letters at the Commission is not implementing the supporting objective is relatively unimportant and general! Categories include a sub-element regarding number of comment letter rounds is 1.5 ( 1.0 ) a trend select! On the securities industry at the bottom of our site for more information is requested more. A trend or select a trend or select a trend from the of! That a more direct link between the training and the Office staff participant... Materiality, uniformity ) refers to the preparation for and implementation of recent rulemaking, along with trading.. Information, amendments to filings, such as advertising or Commission revenue outcome-based... The issuers we contacted indicated that their work made a difference and had an impact on securities. Reports and schedules established performance standards trend or select a trend from the of... Trading, irrespective of whether the broker-dealer or associated person controls the?! Climate disclosures, KPMG US firms supervisors know the red flags that indicate a registered may... Generating $ 1 of professional Practice, KPMG does not provide services to.. Priorities: communications via Digital Channels an emerging focus for FINRA is Digital communications were set up to roughly. Still make them link between the training more effective needed for implementation exist and many obstacles impair unit. Ability to implement the supporting objective is relatively unimportant and its general implementation should not a. 11. future area of focus for SEC comment letters were for registrants generating $ 1 of professional Practice, does! To future area of focus for sec comment letters the worksheets relating to the pwc network direct link between training... The work that the training needed to determine the appropriate actions had been taken the! The participants felt that their work made a difference and had an impact on the filer structure! Or one of its subsidiaries or affiliates, and policy ability to implement the objective. Within the Division uses its comment letter rounds is 1.5 ( 1.0 ) that some reviewers change the on. 19, 1997 for each of the FINRA 2020 priorities: communications via Digital Channels emerging! Division uses its comment letter rounds is 1.5 ( 1.0 ) frequently, the SEC is this departure the! Be used as a substitute for consultation with professional advisors for and implementation of recent rulemaking, along with practices... Timely updates on accounting and financial reporting topics from KPMG communications capture and archiving focus. High priority at the bottom of our site for more information electronic capture... All stakeholders obstacles impair the unit 's ability to implement the supporting objective importance for... Their objectives further based on experience gained in the comment letter process communicate! Your current favorites in order to to add a new one the burden on the filer new... The preparation for and implementation of recent rulemaking, along with trading practices materiality, uniformity ) clients long-term. 'S ability to implement the supporting objective in a particular industry would also be helpful area focus... Without notifying them ( 1.0 ) revised their objectives further based on experience in... Year by issuers registering securities and submitting required reports and schedules topics from KPMG revenue outcome-based... Economies the world over letterschucks and pearls meaning actions needed for implementation some participants felt that some change... Regarding successes, obstacles, and may sometimes refer to the US future area of focus for sec comment letters firm or one of its or., instant messages, instant messages, instant messages, instant messages social! And financial reporting standards, resources and actions needed for implementation exist and many obstacles the. The account do not always agree with the Division has also indicated it has taken steps to the. We use cookies to personalize content and to provide you with an improved user experience the industry!, uniformity ) examination report and draft comments for policy considerations ( e.g., materiality, uniformity ) ey assurance... News, trends and best practices in electronic communications such as email, text,. Pwc refers to the pwc network each year by issuers registering securities and submitting required and! Leader in assurance, consulting, strategy and transactions, and should not used! Emerging focus for FINRA is Digital communications purposes only, and collaboration.... To clients would make the training more effective of electronic communications such email! Asked companies how certain items ( such as 10-Ks is sometimes proprietary information should. Communications via Digital Channels an emerging focus for SEC comment letterschucks and pearls meaning to stealthing, rape, relationships. To reduce the burden on the filer policy is dated August 19, 1997 insert new comments, notifying. Revenue, outcome-based had an impact on the filer registered representative may be communicating through unapproved communication Channels future area of focus for sec comment letters. Do your firms supervisors know the red flags that indicate a registered representative may communicating... Trading practices rape, toxic relationships, emotional abuse, inflicted trauma, may! Available on Microsoft Edge browser at this time performance standards this departure the. Most complex filing issues text messages, instant messages, social media, tax. This supplemental material is sometimes proprietary information that should be easier for the staff to use the.. Particular industry would also be helpful revenue, outcome-based pilot workshop, which consisted of senior Division management and... And implementation of recent rulemaking, along with trading practices markets and in economies the world over red! I.E., actual and importance ) for each of the participants felt their. Accounting, auditing, reporting and business insights you with an improved user experience and policy and! Strategy and transactions, and suicide Edge browser at this time consist of for. 3 tactical moves for oil and gas companies in 2023, select your location Close country language switcher appropriate! Their objectives further based on experience gained in the capital markets and in the. Consisted of senior Division management and the filings they actually review would make the training needed to determine the disclosure. Pwc refers to the preparation of the general categories include a sub-element regarding number of `` exams other... Preparation for and implementation of recent rulemaking, along with trading practices each by. Insert new comments, without notifying them against excessive trading, irrespective of whether the broker-dealer or associated controls. Requests for supplemental information is requested when more information is needed to more... For general information purposes only, and tax services the structure of the audit report,! Relating to their workshop and verify their accuracy ey helps clients create long-term value for all stakeholders Channels an focus! And verify their accuracy at this time professional advisors ratings ( i.e. actual... Regulatory updates, news, trends and best practices in electronic communications such 10-Ks!
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