The Division of Corporation Finance reviews filings submitted by issuers intending to offer securities in the public markets. The applicable policy is dated August 19, 1997. "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 . 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. The workshop participants discussed and anonymously rated each supporting objective. SEC Comment Letter Trends. Copyright 2023 Deloitte Development LLC. She earned her Juris Doctorate from Nova Southeastern University. As a result of their review, they edit and add comments as appropriate. During the audit, management designated the primary objective of the comment letter process to be: Division management also identified six supporting objectives. Workshop participants overwhelmingly reported that, although not perfect, the comment letter process is effective in improving disclosure. Comments were received timely and they were able to resolve their comments in time to execute their transactions. For at least the past year, the Division received feedback indirectly from companies on their filing review experience. Outline whether employees have the ability to communicate via email through means other than their firm email address and through third-party communication systems such as Bloomberg and Reuters. companies. and/or revise the labeling of your non-GAAP financial measures in future filings to adequately reflect what is being presented." (SEC Comment Letter to GGP Inc., (March 30, 2017).) A number of the aforementioned trends are likely to continue in In 2020, segment reporting moved from the fifth to the fourth most common topic of SEC comments, representing 14% of all comments. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional . We bring together extraordinary people, like you, to build a better working world. This content is copyright protected. Over the past several years, the global economy has been affected by a variety of emerging market events, and the SEC staff often issued comments on these topics to request expanded disclosures aimed at providing decision-useful information to investors. 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. We collected two sets of ratings (i.e., actual and importance) for each of the objectives. in the 2022 edition of this publication: Was derived from data provided by Audit CEO survey: US CEOs brace for a recession of unknown magnitude. The regulators will continue to penalize firms and their employees for failing to meet regulatory requirements, including fines and other disciplinary actions. Senior and middle managers and support offices such as Chief Counsel and Chief Accountant should participate in training. 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. By providing your details and checking the box, you acknowledge you have read the, The following fields are not editable on this screen: First Name, Last Name, Company, and Country or Region. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. Staff participants believed that the performance element for number of filings reviewed overshadowed the other performance rating criteria in their evaluations. This document is an HTML formatted version of a printed document. percent of reviews with comment letters were for registrants generating $1 The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. 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. It is for your own use only - do not redistribute. Program performance measures are used to measure and evaluate the performance of the review of filings. These letters set forth staff positions and do not constitute an official expression of the SECs views. Participants also valued the extent to which they exercised judgment in their work. The Control Self Assessment (CSA) methodology used consists of four primary tasks: identify management objectives, convene workshops to discuss and rate each objective, evaluate the workshop data, and prepare an audit report. In a sign of the significant increased focus on climate change that has taken place under the Biden administration, the Wall Street Journal recently reported that the SEC's Division of Corporation Finance has sent comment letters to "dozens" of companies relating to their climate change disclosures. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. Data Evaluation that have been closed and subsequently posted to EDGAR. }); Marianna Shafir, Regulatory Advisor at Smarsh, is responsible for regulatory affairs worldwide. The Government Performance and Results Act of 1993 (GPRA) requires agencies to develop outcome-based performance measures to gauge progress toward goals. Staff requests futures comments when the improvements are not immediately consequential, but will improve disclosure. Unless noted otherwise, comment letter trend information 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. Questionnaires are presented after each segment and at the end of the course to obtain feedback from the participants in an effort to continuously improve the program. Heres how the numbers have played out over the past five years: As the chart above illustrates, while there has been a notable decline in the number of reviews with comment letters over the past several years, that trend reversed in review year 2022. For example, in 2010 the staff issued (1) periodic updates to the Consider removing one of your current favorites in order to to add a new one. the 10% increase in SEC staff comment letters in the year ended 30 June 2022. with large accelerated filers representing 61 percent of the reviews with Certain services may not be available to attest clients under the rules and regulations of public accounting. 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 . investors. At the beginning of the audit, the Office audit staff worked closely with management to develop concise objectives for the comment letter process. The focus of our analysis related to the Financial Statements, footnotes and related disclosures made in Management's Discussion & Analysis filed on Form 10-Q and Form 10-K of companies with a market capitalization between $100 million and $1 billion. You can set the default content filter to expand search across territories. 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). Some participants felt that some reviewers change the comments on a filing, or insert new comments, without notifying them. On September 22, 2021, in a step that emphasizes the SEC's increased focus on climate change disclosure, the SEC's Division of Corporation Finance ("Corp Fin") issued a sample letter for public companies containing comments illustrative of those that it may issue to companies "regarding their climate-related disclosure or the . 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. SEC Reporting, CFGI analyzed over 100 SEC comment letters made available by the SEC between April 1, 2013 and September 30, 2013. Read our cookie policy located at the bottom of our site for more information. By: | . Some staff mentioned a perceived lack of promotion opportunity (especially to GS-14), as well as a lack of bonuses and other rewards. Firms cannot assume advisors arent using their personal emails to communicate with clients. Executive Summary By continuing to browse this site, you consent to the use of cookies. 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. 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. In many instances, they had already recognized the issues and taken corrective actions. Content Warning: References to stealthing, rape, toxic relationships, emotional abuse, inflicted trauma, and suicide. Recent SEC disclosure rules and interpretive Our analysis of SEC comment letters issued in relation to Form 10-K and Form 10-Q filings . The training is presented by various Division senior staff and managers. 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. This departure from the traditional audit report comment process provided input at an earlier stage in the writing process. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. FINRA 2020 Exam PrioritiesThe Financial Industry Regulatory Authority (FINRA) has also released its 2020 priorities letter highlighting its areas of focus. The staff and management disagreed about whether the measurement of staff performance was achieving the Division's objectives. ttp://www.sec.gov/answers/commentletters.htm. All rights reserved. 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. The Office selected staff to participate in the workshops based on criteria developed by the Office (e.g., must have been on staff at least six months). Do Not Sell or Share My Personal Information. The objectives selected for evaluation were those that management thought were both important and for which evaluation data would be useful. 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. On the other hand, staff described a number of concerns. Fullwidth SCC. Publication date: 30 Jun 2022. us SEC Comment Letter Trends. These participants described instances where they were embarrassed when an issuer contacted them about a comment they knew nothing about, because the reviewer inserted it without their knowledge. reviews that are still ongoing or have recently been By continuing to browse this site, you consent to the use of cookies. 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. By Anonymous. This message will not be visible when page is 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 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. 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. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. Participants also indicated that the result of their activities can be expressed better than relying solely on the number of filings reviewed.2 The Division has indicated that its reviews resulted in identification of novel and unique accounting issues, changes in industry practices, and changes in Generally Accepted Accounting Principles. 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. After reviewing the information we contacted five companies not on the Division's list for their feedback on the Division's comment letter process. Importance. For Reg BI, firms should be well on their way to determining technology changes needed for compliance with the new rule. 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. 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, managements discussion and analysis and revenue recognition. Participants also gave us their ideas of the characteristics of outstanding staff. Actual Effectiveness Explore Deloitte University like never before through a cinematic movie trailer and films of popular locations throughout Deloitte University. Below are highlights of the FINRA 2020 priorities: Communications via Digital Channels An emerging focus for FINRA is digital communications. The Task Force's recommendations have thus far resulted in elimination of forty-six rules and six forms. The comments are then faxed to the issuer. Subscribe to receive Roadmap series publications via email. The SEC has recently started to release the comment letters and responses. Workshop discussions indicated that this supporting objective received low scores from participants because of concern with the Division's use of number of filings reviewed as its primary measure of program performance. These materials were downloaded from PwC's Viewpoint (viewpoint.pwc.com) under license. Periodically test the systems to ensure the communications are being captured for review and retention. 1 The supporting objective is not important and should not be implemented at the Commission. 4. The filings are received by the Commission, sent to the Division, and then screened for review. By Jeremy Simons. In addition to providing our insights on the nature of the SEC staff comments, we provide sample text from the SEC staffs comments and links to where you can learn more about the accounting and disclosure requirements addressed in each topical area. By Farzad F. Damania, Jennifer L. Howard and Ryan A. Lilley. 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