May be different upon comparisons with the Unless noted otherwise, comment letter trend information At the beginning of each workshop, a senior manager from the Division introduced the workshop and provided background information on their purpose. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional . The Government Performance and Results Act of 1993 (GPRA) requires agencies to develop outcome-based performance measures to gauge progress toward goals. Program performance measures are used to measure and evaluate the performance of the review of filings. Change Disclosures. 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. Program Performance Measures - Measure and evaluate the performance of the comment letter process accurately. The SEC has recently started to release the comment letters and responses. During each workshop, Office staff summarized participant discussions regarding successes, obstacles, and recommendations for each objective. 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. All rights reserved. Participants indicated that these senior staff, referred to as "reviewers," are appointed based on their experience and background in the particular group. Staff requests futures comments when the improvements are not immediately consequential, but will improve disclosure. Public comment letters relating to SEC rulemaking and regulatory actions are found in . 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 Also, in August 1995, the Chairman organized the Task Force on Disclosure Simplification to review and streamline regulations relating to forms and disclosure requirements. The Division gave us information on issuers that were contacted by the Chairman within the past year for their views on the filing review process. result in increased focus and scrutiny from the SEC staff. Broker-dealer examinations will focus on issues relating to the preparation for and implementation of recent rulemaking, along with trading practices. If the firm elects to prohibit its use altogether, keeping employees from accessing non-member email platforms for business purposes, then there is a need to require employees to certify that they are acting in accordance with such policies and procedures on an annual or more frequent basis. This webcast will feature: Recent themes and trends in SEC comment letters closing letter to the registrant) within the corresponding Participants were generally pleased with the training they received. 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. After completing the review, designated senior staff (reviewers) look over the filing and proposed comments. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. Do not delete! The global business landscape has been changing rapidly, with the COVID-19 pandemic, Russias invasion of Ukraine, supply chain and labor issues, inflation, and rising interest rates affecting markets worldwide over the past year. 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. The following areas are central to the standard's accounting and disclosure requirements and are often the subject of SEC comment letters: 1. in the number of public companies over the past several years, which is largely Read our best practices here: SEC comment letter trends for financial services companies. 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. Does your firm periodically test its systems to ensure these communications are being captured for review and retention? The Office generally endorses these recommendations and makes additional recommendations in its report. 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. You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website. However, in certain industries, such as real estate, banking, and insurance, the checklist is augmented by specialized requirements for that industry called industry guides. Discover how EY insights and services are helping to reframe the future of your industry. The Office prepared the audit report. Please seewww.pwc.com/structurefor further details. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. In the letters, the regulators highlighted technology-related topics while also focusing on existing priorities, reminding firms of the need to adopt comprehensive supervisory processes that will ensure compliance and exam preparedness. Please see www.pwc.com/structure for further details. Prior research on SEC comment letters has almost exclusively focused on reviews of periodic filings, such as 10-Ks. 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. The filings are received by the Commission, sent to the Division, and then screened for review. The global business landscape has been changing rapidly, with 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. 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. Do Not Sell or Share My Personal Information. The Division should use more outcome-based program performance measures to gauge the success of the comment letter process. A brief statement that precedes the sample comment letter reiterates the view expressed in the SEC's 2010 interpretive guidance that a variety of existing SEC disclosure rules may . Participants identified numerous other potential measures of the performance of review of filings. 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. CEO survey: US CEOs brace for a recession of unknown magnitude. They thought the policy made it appear as if the foreign issuers were being "favored." Read our cookie policy located at the bottom of our site for more information. The field work was performed between May and October 1997 in accordance with generally accepted government auditing standards. Executive Summary. These letters set forth staff positions and do not constitute an official expression of the SECs views. For more information about our organization, please visit ey.com. Former San Antonio-area stock broker and investment adviser Matthew A. Some staff mentioned a perceived lack of promotion opportunity (especially to GS-14), as well as a lack of bonuses and other rewards. 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. 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. Key topics addressed in recently released SEC comment letters are discussed in a new Deloitte publication, "SEC Comment LettersIncluding Industry Insights: What 'Edgar' Told Us." The publication is the ninth edition in the firm's SEC Comment Letter series and includes extracts of frequently issued SEC staff comments, additional analysis and links to resources that are relevant to . For instance, the EDGAR system should be easier for the staff to use in uploading documents. Communicate Comments SEC staff is using insights from this work in its drafting of new ESG-related disclosure requirements. In addition, we reviewed twenty comment letters to determine if they were prepared in accordance with Division operating procedures. This brought all comments about a particular issue together in one document and facilitated discussion and evaluation of the issues. Smarsh is a registered trademark of Smarsh Inc. in the European Union. This departure from the traditional audit report comment process provided input at an earlier stage in the writing process. attributable to increased transaction activity related to traditional initial 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. One of the general categories include a sub-element regarding number of filings reviewed. Management revised their objectives further based on experience gained in the pilot workshop, which consisted of senior Division management. How does the health equity ecosystem move from awareness to action? 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. 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). All rights reserved. The facilitator then repeated the procedure to rate how important (or desirable) the participants thought the objective was. A version of a private sector, internal audit methodology (Control Self-Assessment or CSA) was adapted for this purpose. 5 A sample comment letter posted on the . * The SEC publicly releases comment letters no . 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. 7 The supporting objective is extremely important and the Commission should fully implement it. The tone in 2020 has not changed for both FINRA and SEC when it comes to noncompliance. 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. DTTL (also referred to as "Deloitte Global") does not provide services to clients. 5 The Commission is generally implementing the supporting objective. We summarized the comments on flip charts. considering new requirements related to cybersecurity and climate disclosures, 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. 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. Please enable JavaScript to view the site. 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. Subscribe to receive Roadmap series publications via email. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. 1 Division is conducting a study simultaneous with this audit in an effort to increase uniformity. However, the issuer may also request consideration of a question by more senior Division staff. 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. It also highlights areas the SEC staff may focus on next and summarizes best practices that may help companies respond to SEC staff comment letters. 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. Social login not available on Microsoft Edge browser at this time. Misalignment between information sources will send up red flags and that means comment letters that can significantly set back the IPO timeline. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. For more detail about the structure of the KPMG global organization please visithttps://home.kpmg/governance. We use cookies to personalize content and to provide you with an improved user experience. 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. 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. 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