Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. On September 22, 2021, the Division of Corporation Finance (Division) of the Securities and Exchange Commission (SEC) issued a sample comment letter to highlight its increased focus on climate change-related disclosures or the absence of such disclosures in issuer filings under the Securities Act and the Exchange Act. 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. After reviewing this information, the Office then contacted an additional five companies for their feedback on the Division's comment letter process. These examinations will include RIAs advising retail investors as well as private funds. Program Performance Measures Audit Report, Appendix B - Effectiveness Rating Scales On September 22, 2021, the Staff of the SEC published a sample comment letter regarding climate change disclosures. 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. the global economy has been affected by a variety of emerging market events, and The review also sought to provide management with staff views of the importance of the comment letter process objectives, and to recommend actions to increase the likelihood that their objectives would be achieved. See Terms of Use for more information. 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. Transactional filing reviews, such as those related to mergers and acquisitions (M&A), are a priority of the SEC to which it dedicates significant resources. The printed document may contain agency comments, charts, photographs, appendices, footnotes and page numbers which may not be reproduced in this electronic version. Partner, Dept. 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. 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. Fullwidth SCC. 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. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. comments joining the list. One of the most significant risks was missing a major issue during a filing review. All of the participants felt that their work made a difference and had an impact on the securities industry. Audit Results 3 tactical moves for oil and gas companies in 2023, Select your location Close country language switcher. 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. focus area of sec comment letters revenue recognition. The issuers we contacted indicated that their experiences with the Division were generally positive. * The SEC publicly releases comment letters no . Each workshop took from 4 to 6 hours to complete. We expect these factors to affect the volume of comments next year as well. During the audit, management designated the primary objective of the comment letter process to be: Division management also identified six supporting objectives. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. 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. The Division has already gotten approval for Internet e-mail access. At EY, our purpose is building a better working world. However, they also indicated that the training needed to focus more on the work that the staff actually performed. Participants agreed that the Division uses the number of filings reviewed as its primary performance measure. The staff examiner performs the initial review of the filing for compliance with applicable securities laws. Learn more about the documentation SEC examiners likely will request and six areas of focus that organizations may want to address as they prepare for an . Does your firm have policies and procedures in place regarding the filing, updating, and delivery of Form CRS. The regulators will continue to penalize firms and their employees for failing to meet regulatory requirements, including fines and other disciplinary actions. (5) effectiveness of compliance programs. The questions gave structure to the discussions and facilitated the conduct of the workshops. Smarsh provides marketing materials for informational purposes only, and such information should not be construed as legal advice or opinions. 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. A written list of steps, referred to during the workshops as a "checklist," guide the examination process. Quantitative Analysis Participants also valued the extent to which they exercised judgment in their work. To obtain this information, we conducted six internal audit workshops involving approximately seventeen per cent of Division staff. }); 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. investors. Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. They also indicated that the quality of the reviews sometimes suffered in the push to achieve numerical goals. Our analysis of SEC comment letters identifies the frequency of topical areas addressed by the SEC staff and how their focus . Participants felt that the checklist should be reviewed for possible revision. This training should result in a more consistent approach to review as well as improved communication. On the other hand, staff described a number of concerns. The SECs office of compliance inspections and examinations (OCIE) released its 2020 exam priorities. SEC Comment Letter Trends. In these unprecedented times, the SEC continues to provide registrants with PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Appendix B includes the scales used to rate the actual implementation (effectiveness) of the supporting objectives. In all instances, the Division confirmed that the appropriate actions had been taken during the filing reviews. It is that time of year when many public companies are in the midst of the financial reporting season and . Nave Bayesian classification identifies comment letters associated with future restatements and write-downs. Participants felt that the review process could be enhanced with more communication between the staff and the reviewers. 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. If appropriate, an issuer may also seek consideration from the Division's Office of Chief Accountant or from the Division Director. referred to generally as filings). 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. For more detail about the structure of the KPMG global organization please visithttps://home.kpmg/governance. 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. To help the SEC meet its responsibilities under the Sarbanes-Oxley Act, 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. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. 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. continue to be areas of focus for the SEC in 2011. How do you move long-term value creation from ambition to action. 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. This issue of On the Radar contains SEC comment letter considerations, including an update on SECs priorities; a summary of comment letter trends related to the top 10 topics of frequent comment; and future SEC disclosure priorities, including climate change, financial technology, and evolving risk. The field work was performed between May and October 1997 in accordance with generally accepted government auditing standards. activated.+++ DO NOT USE THIS FRAGMENT WITHOUT EXPLICIT APPROVAL FROM THE CREATIVE Participants indicated that a more direct link between the training and the filings they actually review would make the training more effective. DTTL (also referred to as "Deloitte Global") does not provide services to clients. 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. percent of reviews with comment letters were for registrants generating $1 It also highlights areas the SEC staff . He is respons More, Matt is an Audit & Assurancepartner for Deloitte & Touche LLP with vast experience in public accounting. We bring together extraordinary people, like you, to build a better working world. However, despite these concerns, participants indicated they were proud to work for the Commission, in particular the Division. EY helps clients create long-term value for all stakeholders. 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. 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. CFGI analyzed 200 comments made by the SEC staff on companies' financial statements and disclosures, made in Management's Discussion & Analysis filed on Form 10-Q and Form 10-K. Discover how EY insights and services are helping to reframe the future of your industry. in the 2022 edition of this publication: Was derived from data provided by Audit Examples include: send to my personal email, respond to my gmail account, text me, lets take this offline. These common phrases are indicative of the risk of using unauthorized communication channels. Please seewww.pwc.com/structurefor further details. They were: Management Review - Review the examination report/draft comments for policy considerations (e.g., materiality, uniformity). The Division has training for new staff examiners and accountants. Most of the participants also indicated that they felt a strong sense of responsibility to the investing public and a desire to live up to the Division's, as well as the Commission's, expectations. 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. Comments were received timely and the issuers were able to resolve their comments in time to execute their transactions. Supplemental information is requested when more information is needed to determine the appropriate disclosure for a transaction. Consider removing one of your current favorites in order to to add a new one. We collected data primarily through six workshops (fifty-six staff or approximately 17% of Division personnel participated in the workshops). To help the SEC meet its responsibilities under the Sarbanes-Oxley Act, the SECs Division of Corporation Finance (the Division) continues to selectively review documents filed by registrants under the Securities Act of 1933 and the Securities Exchange Act of 1934. Sharing our expertise and perspective. Welcome to the Deloitte Accounting Research Tool (DART). Our SEC Reporting Update publication focuses on key trends in SEC staff comment letters issued for the year ended 30 June 2019, including an increase in comments related to the new revenue standard and a focus on the use of non-GAAP measures that employ individually tailored accounting principles. Some participants felt that some reviewers change the comments on a filing, or insert new comments, without notifying them. After completing the review, designated senior staff (reviewers) look over the filing and proposed comments. Sub-elements relating to the comment letter process are distributed throughout the six general categories. You may withdraw your consent at any time by emailing privacy@smarsh.com. 5 A sample comment letter posted on the . 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. 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 so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. The staff thought the objective was not being achieved; management rated it as generally being achieved although some obstacles impaired full implementation. PwC. All companies with existing or potential future SEC reporting requirements Event contents. Do your firm and your associated persons consider the express new elements of care, skill, and costs when making recommendations to retail customers? 22 percent of the Forms 10-K filed. guidance related to MD&A and key performance indicators and metrics may The supporting objectives reflect activities that increase the chances of achieving the primary objective. See how we connect, collaborate, and drive impact across various locations. Broader SEC priorities often influence comment letter trends. Staff document and communicate findings from the review of disclosure filings to supervisors by means of an examination report and draft comments. 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. Disclosure-event abnormal returns, revenue . We made several comparisons (e.g., how well ratings aligned). 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. consistent with last years list, with the notable exception of climate-change Participants indicated that issuers sometimes do not appear aware of the protections available for the supplemental material submitted to the Division. with large accelerated filers representing 61 percent of the reviews with STUDIO DEVELOPMENT TEAM +++. Data Evaluation 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. EY helps clients create long-term value for all stakeholders. We also observed an increased number of comments related to acquisitions, mergers, and business combinations following a rise in merger and acquisition activity over the past several years. 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