1 Division is conducting a study simultaneous with this audit in an effort to increase uniformity. 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.). 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).) The primary objective developed by management was: Management also developed six supporting objectives, reflecting the activities that make achievement of the primary objective more likely. Please refer to your advisors for specific advice. Resolve Comments - Gain issuer acceptance of comments through implementing amendments and futures comments. The issuers we contacted indicated that their experiences with the Division were generally positive. This box/component contains code No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Participants indicated that improving these characteristics in the staff as a whole would also improve the comment letter process. 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. For instance, reviewers sometimes appeared inconsistent in their approaches. For more information about our organization, please visit ey.com. By continuing to browse this site, you consent to the use of cookies. Each member firm is a separate legal entity. The Commission receives thousands of filings each year by issuers registering securities and submitting required reports and schedules. These outcomes of staff filing reviews were documented in "quantifiable benefits" memos. Although not identified among the top 10 topics, COVID-19 and the Russia-Ukraine war have been the source of various SEC staff comments issued over the past year, many of which have focused on disclosures related to (1) risk factors, (2) MD&A, (3) early-warning disclosures related to impairments, and (4) adjustments to non-GAAP measures. They also indicated that the quality of the reviews sometimes suffered in the push to achieve numerical goals. This supplemental material is sometimes proprietary information that should be protected from public disclosure. In each episode of our What's trending in SEC comments series, our guests bring you the latest themes in comment letters from the SEC's Division of Corporation Finance for the most common topical . At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. Do your firm and your associated persons apply a best interest standard to recommendations of types of accounts? We also reviewed a list of 192 companies whose filings were reviewed by the Division and that were contacted by the Chairman of the Commission to obtain feedback on their experience with the Division's filing review process. While it is difficult to predict what new comment letter trends are on the horizon, we look to the Commissions priorities to help us predict topics of focus in the coming year. Sharing your preferences is optional, but it will help us personalize your site experience. You can set the default content filter to expand search across territories. 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. complied with the existing interpretive guidance. 2023 Smarsh Inc. Smarsh and the Smarsh logo are registered trademarks of Smarsh Inc. in the United States. Click here to extend your session to continue reading our licensed content, if not, you will be automatically logged off. 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. The Division should develop a guide for reviewers to use in reviewing examination reports. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. Please see www.pwc.com/structure for further details. window.drift.api.startInteraction({ interactionId: 90922 }); Participants rated resolution of comments as the second most important of the six supporting objectives. the SEC staff often issued comments on these topics to request expanded Comment Letters. Does your firm have procedures and training in place to assess recommendations using a best interest standard? Initially, the issuer communicates with the staff accountant and examiner. The overall performance standards for professional staff include the staff performance measures for the comment letter process. 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 . Members utilizing this blocking functionality should periodically conduct tests to ensure that it is functioning as designed or intended. This box/component contains JavaScript that is needed on this page. Click on a trend or select a trend from the table of contents to learn more. We How does the health equity ecosystem move from awareness to action? Financial_services_DM. 6LinkedIn 8 Email Updates, Appendix A - Control Self Assessment Methodology. Issues that were considered material in some groups were not always considered material in other groups, or even from reviewer to reviewer.1 No written guidance has been developed for reviewers. This audit report is based on these analyses. Given the recent amendments to the rules governing MD&A, we expect comments on this topic to remain high. Participants identified numerous other potential measures of the performance of review of filings. At EY, our purpose is building a better working world. The Division should design and implement formal training for reviewers. In addition, during the current year, approximately 50 The Division has training for new staff examiners and accountants. The SECs office of compliance inspections and examinations (OCIE) released its 2020 exam priorities. 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. (review years). 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. Misalignment between information sources will send up red flags and that means comment letters that can significantly set back the IPO timeline. Qualitative Analysis Some industries have no specialized guidance. The electronic documents were then placed on the Division's file server. The Division should use more outcome-based program performance measures to gauge the success of the comment letter process. Does your firm have policies and procedures in place regarding the filing, updating, and delivery of Form CRS. Cultivating a sustainable and prosperous future, Real-world client stories of purpose and impact, Key opportunities, trends, and challenges, Go straight to smart with daily updates on your mobile device, See what's happening this week and the impact on your business. Publication date: 30 Jun 2022. us SEC Comment Letter Trends. After reviewing a filing, staff prepare an examination report summarizing the transaction and identifying any material disclosure issues. 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. 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. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. reviews were closed and posted to EDGAR after that edition However, adequate review coverage of issuer filings, given limited staff resources, is essential to the mission of the Division. Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. comment letter trends affecting SEC filers, see 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. These potential measures include: the cost of the filing review function versus the dollar volume of the markets; the cost of the review as a percent of the filing fee; the dollar amount of changes in financial statements based on filing reviews; the number of material comments on filings with unqualified ("clean") audit opinions; the number of filings with comments implemented; the number of foreign companies that file with the SEC; and the value of fraudulent offerings stopped. Receive timely updates on accounting and financial reporting topics from KPMG. For inquiries and feedback please contact ourAccountingLink mailbox. 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. 27 11. future area of focus for sec comment letterschucks and pearls meaning. Program Performance Measures - Measure and evaluate the performance of the comment letter process accurately. Another risk identified was associated with supplemental materials requested from issuers in response to comments. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. SEC staff from the Divisions of Corporation Finance and Investment Management issue this type of comment letter in connection with their review of disclosure filings. 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. Technology continues to be a key theme for the regulators. Broker-dealer examinations will focus on issues relating to the preparation for and implementation of recent rulemaking, along with trading practices. Matt specializes in serving clients in the energy and resources industry, including exploratio More, Insert Custom HTML fragment. Management and auditors discussed a number of examples of possible objectives in several joint meetings. 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. OCIE notes that the positive impact of effective compliance is clear from the exams it has conducted.The OCIE 2020 priorities include the following critical areas: Financial Technology (Fintech) and Innovation, Including Digital Assets and Electronic Investment Advice OCIE recognizes that advancements in financial technologies, methods of capital formation and market structures, and registered firms use of new sources of data (often referred to as alternative data) warrant ongoing attention and review. Participants rated communication of comments as the most important of the six supporting objectives. comments on accounting and reporting related to these matters. Also, they list any deficiencies in the filing's disclosures and propose comments relating to those deficiencies. 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