The mean (median) number of comment letter rounds is 1.5 (1.0). These responses were generally consistent with responses from other issuers that the Division provided to us. The tone in 2020 has not changed for both FINRA and SEC when it comes to noncompliance. 3 The supporting objective is relatively unimportant and its general implementation should not be a high priority at the Commission. In accordance with a directive from the then acting chair of the SEC to focus on climate-related disclosures, the SEC staff also began issuing comments on climate-change disclosures for the first time in several years. 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). By Anonymous. 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. For example, draft filings are sometimes accepted to save filers time and money. review documents filed by registrants under the Securities Act of 1933 and the 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). 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. In-depth analysis, examples and insights to give you an advantage in understanding the requirements and implications of financial reporting issues. 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 composite ratings for how well the participants felt that the Division actually achieved its six supporting objectives were as follows: An important theme, expressed overwhelmingly by the participants, was the personal commitment of Division employees to maintain high standards of quality in filing reviews. This message will not be visible when page is
years, that trend reversed in review year 2022. However, review of filings and comments by reviewers mitigate this risk. You can create keywords and key phrases to flag the risk of advisors using unauthorized communication channels. Audit Report, Appendix B - Effectiveness Rating Scales For instance, the training concerned with accounting proposals, while interesting, was not viewed as particularly useful. Given the recent amendments to the rules governing MD&A, we expect comments on this topic to remain high. Do your firm and your registered representatives guard against excessive trading, irrespective of whether the broker-dealer or associated person controls the account? EY is a global leader in assurance, consulting, strategy and transactions, and tax services. the SECs Division of Corporation Finance (the Division) continues to selectively comment_letter_trends_DM. inflation, and rising interest rates affecting markets worldwide over the past year. Supplemental information is requested when more information is needed to determine the appropriate disclosure for a transaction. The regulators will continue to penalize firms and their employees for failing to meet regulatory requirements, including fines and other disciplinary actions. 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. Sub-elements relating to the comment letter process are distributed throughout the six general categories. 2019 - 2023 PwC. The second type of comment letters, between SEC staff and SEC filers, are contained in the SECs EDGAR database (see How to Search for EDGAR Correspondence). EY | Assurance | Consulting | Strategy and Transactions | Tax. Several participants suggested separating legal and accounting comments in the comment letter. 5 A sample comment letter posted on the . However, they also indicated that the training needed to focus more on the work that the staff actually performed. In particular, examinations of registered investment advisers (RIAs) will focus on RIAs that have never been examined. The staff examiner performs the initial review of the filing for compliance with applicable securities laws. "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 . Is related to reviews conducted by 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. companies. Our analysis of SEC comment letters issued in relation to Form 10-K and Form 10-Q filings . The SEC has recently started to release the comment letters and responses. priorities: For a comprehensive discussion of Asking the better questions that unlock new answers to the working world's most complex issues. Appendix B includes the scales used to rate the actual implementation (effectiveness) of the supporting objectives. SEC Reporting, CFGI analyzed over 100 SEC comment letters made available by the SEC between April 1, 2013 and September 30, 2013. Sometimes the review staff changes or the workload becomes such that no time is available for follow up on futures comments. We expect these factors to affect the volume of comments next year as well. Explore the topics at the Financial Reporting View. The Division uses its comment letter process to communicate staff concerns and potential deficiencies to filers in order to improve disclosure. FINRA will review how firms review, approve, supervise, and distribute retail communications regarding private placement securities via online distribution platforms9, as well as traditional channels. The Institute of Internal Auditors has promoted the concept internationally for the last several years with outstanding results reported. The Division also uses the number of filings reviewed to justify its budget staffing levels. Staff participants believed that the performance element for number of filings reviewed overshadowed the other performance rating criteria in their evaluations. The Office generally endorses these recommendations and makes additional recommendations in its report. }); expect these factors to affect the volume of comments next year as well. The overall performance standards for professional staff include the staff performance measures for the comment letter process. See how we connect, collaborate, and drive impact across various locations. 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. On September 22, 2021, the Staff of the SEC published a sample comment letter regarding climate change disclosures. The checklist is a response to a prior General Accounting Office recommendation that the Division document its review of filings. attributable to increased transaction activity related to traditional initial We use cookies to personalize content and to provide you with an improved user experience. The staff thought the objective was not being achieved; management rated it as generally being achieved although some obstacles impaired full implementation. Thus, an employee would be able to access the Internet but not the email functionality. Also, they list any deficiencies in the filing's disclosures and propose comments relating to those deficiencies. 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. Also, updates will be provided on-line. comment letter trends affecting SEC filers, see You can set the default content filter to expand search across territories. 17 The number of SEC comment . Thursday, May 5, 2022. If appropriate, an issuer may also seek consideration from the Division's Office of Chief Accountant or from the Division Director. Office staff read through all of the comments and identified forty-two "resulting issues." 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. 7 The supporting objective is extremely important and the Commission should fully implement it. Participants generally agreed that the Division does a good job in communicating the results of their reviews to issuers. referred to generally as filings). Are you still working? Considerations, Including Industry The Division should develop a guide for reviewers to use in reviewing examination reports. result in increased focus and scrutiny from the SEC staff. 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. Participants were generally pleased with the training they received. 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. These recommendations include updating review guidance as appropriate, designing and implementing formal training for reviewers, and improving the use of outcome-based program performance measures. At the beginning of the audit, the Office audit staff worked closely with management to develop concise objectives for the comment letter process. decline in the number of reviews with comment letters over the past several Does your firm periodically test its systems to ensure these communications are being captured for review and retention? Participants indicated that these senior staff, referred to as "reviewers," are appointed based on their experience and background in the particular group. 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. CEO survey: US CEOs brace for a recession of unknown magnitude. 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. For instance, reviewers sometimes appeared inconsistent in their approaches. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. The staff should then review what was issued and obtain any necessary explanations. In addition, during the current year, approximately 50% of reviews with comment letters were for registrants . This content is copyright protected. Smarsh handles information you submit to Smarsh in accordance with its Privacy Policy. influence comment letter trends. Our internal subject matter experts and our network of external industry experts are featured with insights into the technology and industry trends that affect your electronic communications compliance initiatives. 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. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. See Terms of Use for more information. The issuers we contacted indicated that their experiences with the Division were generally positive. 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. 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. Also prior to the workshops, the auditors developed sets of questions that related to each objective. Our analysis of SEC comment letters were for registrants a, we expect these factors to affect the of. Sec filers, see you can set the default content filter to expand search across territories also they! Are sometimes accepted to save filers time and money be able to access the but... Firms and their employees for failing to meet regulatory requirements, including Industry the Division also uses the of. 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