comment letter trends affecting SEC filers, see years, that trend reversed in review year 2022. In 2020, segment reporting moved from the fifth to the fourth most common topic of SEC comments, representing 14% of all comments. Staff requests futures comments when the improvements are not immediately consequential, but will improve disclosure. Investment company examinations will focus on mutual funds and exchange-traded funds, the activities of their RIAs, and the oversight practices of their boards of directors. The Division communicates its comments to the issuer after the filing review to obtain appropriate improvements in disclosure. 7 The Commission is successfully implementing the supporting objective. FINRA included a checklist of what examiners will be looking for after Reg BI goes into effect: Firms should consult this years priorities letters to better assess their compliance with relevant requirements and regulators expectations. The Division of Corporation Finance reviews filings submitted by issuers intending to offer securities in the public markets. 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. Dawn Taylor welcomes Dr. Pamela Larde . This is a good time to review your policies and procedures to ensure the policies properly address the firms business activities and comply with the provisions of the recordkeeping rule. influence comment letter trends. The Division should review the role of futures comments to determine if there is any adverse impact on disclosure if there is no follow-up, and take appropriate action. Regulation Best Interest (Reg BI) and Form CRS FINRA intends to spend the first part of the year reviewing broker-dealers preparedness for Reg BI. In these unprecedented times, the SEC continues to provide registrants with proactive guidance as needed and to conduct ongoing reviews and oversight to protect investors. The Securities and Exchange Commission's Office of Inspector General (Office) evaluated the Division of Corporation Finance's (Division) comment letter process. These factors are crucial to an effective program. 4. By clicking "submit", you consent to Smarsh processing your information and storing it in accordance with the Privacy Policy and agree to receive communications from Smarsh and its third-party partners regarding products and services that may be of interest to you. All rights reserved. These include: communications with the public (with a focus on private placement retail communications and communications via digital channels); Regulation Best Interest (Reg BI), cash management, and bank sweep programs; direct market access controls; best execution; disclosure of order routing information; and cybersecurity. The staffs comments are in response to a companys disclosure and other public information and are based on the staffs understanding of that companys facts and circumstances. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory. FASB Accounting Standards Codification Manual, SEC Rules & Regulations (Title 17 Commodity and Securities Exchanges), Trust Services Principles, Criteria, and Illustrations, Principles and Criteria for XBRL-Formatted Information, Audit and Accounting Guides & Audit Risk Alerts, Other Publications, Press Releases, and Reports, Dbriefs Financial Reporting Presentations, Business Acquisitions SEC Reporting Considerations, Comparing IFRS Accounting Standards and U.S. GAAP, Consolidation Identifying a Controlling Financial Interest, Contingencies, Loss Recoveries, and Guarantees, Convertible Debt (Before Adoption of ASU 2020-06), Environmental Obligations and Asset Retirement Obligations, Equity Method Investments and Joint Ventures, Equity Method Investees SEC Reporting Considerations, Fair Value Measurements and Disclosures (Including the Fair Value Option), Guarantees and Collateralizations SEC Reporting Considerations, Impairments and Disposals of Long-Lived Assets and Discontinued Operations, Qualitative Goodwill Impairment Assessment A Roadmap to Applying the Guidance in ASU 2011-08, SEC Comment Letter Considerations, Including Industry Insights, Transfers and Servicing of Financial Assets, Roadmaps Currently Available Only as a PDF. 5 The Commission is generally implementing the supporting objective. In general, the mentoring program, where senior staff accountants and examiners provide guidance to more inexperienced staff, was well received, although the quality of the individual mentoring experience depended on the quality of the mentor. 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. Each member firm is a separate legal entity. Also, in August 1995, the Chairman organized the Task Force on Disclosure Simplification to review and streamline regulations relating to forms and disclosure requirements. 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. Issuers who disagree with the views of the Division staff may contact successively higher levels in the Division, including the Director. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. 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. The Office keyed the anonymous assessment ratings of the workshop participants into Excel spreadsheets for analysis. 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. Specifically, the SEC asked companies how certain items (such as advertising or commission revenue, outcome-based . She earned her Juris Doctorate from Nova Southeastern University. If you have any questions pertaining to any of the cookies, please contact us us_viewpoint.support@pwc.com. This content is copyright protected. To send a message to . Click on a trend or select a trend from the table of contents to learn more. Another letter signed by over five hundred investors, foundations, companies, lawmakers, and NGOs, expresses support for SEC rulemaking by noting that "climate change poses a variety of material risks to companies of all sizes in all industries across our nation.". Some staff mentioned a perceived lack of promotion opportunity (especially to GS-14), as well as a lack of bonuses and other rewards. 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. Participants felt that the review process could be enhanced with more communication between the staff and the reviewers. They also felt that the training manual was improved. Securities Exchange Act of 1934. 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. Publication date: 30 Jun 2022. us SEC Comment Letter Trends. Comment Letters. EY helps clients create long-term value for all stakeholders. Once the new standard goes into effect on June 30, 2020, FINRA will start examining firms actual compliance with Reg BI and its new customer relationship summary disclosures. Do not delete! Another risk identified was associated with supplemental materials requested from issuers in response to comments. EY is a global leader in assurance, consulting, strategy and transactions, and tax services. 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. They felt that segregating the accounting and legal comments in the comment letter would make it easier for the issuer to contact the originator of the comments. addition, we expect the number of comments to grow next year because of a rise These letters set forth staff positions and do not constitute an official expression of the SECs views. years to come. 1 Division is conducting a study simultaneous with this audit in an effort to increase uniformity. closed. Applicability. It is for your own use only - do not redistribute. Review the firms practices, policies, and procedures to confirm that these address the enforcement priorities. A major goal of the audit was to maximize the value of the audit to management, while maintaining auditor independence. The questions gave structure to the discussions and facilitated the conduct of the workshops. Does your firm have a process in place to evaluate new tools available to your registered representatives to determine whether there are digital communications channels that should be captured, included in your firms routine electronic communications supervisory reviews, and stored in accordance with books and records requirements? However, they also indicated that the training needed to focus more on the work that the staff actually performed. Certain services may not be available to attest clients under the rules and regulations of public accounting. One of the general categories include a sub-element regarding number of filings reviewed. Broker-dealer examinations will focus on issues relating to the preparation for and implementation of recent rulemaking, along with trading practices. As registrants start to prepare for the 2022 annual reporting cycle, they may find it helpful to consider the following SEC priorities: For a comprehensive discussion of comment letter trends affecting SEC filers, see Deloittes Roadmap SEC Comment Letter Considerations, Including Industry Insights. Follow along as we demonstrate how to use the site. These keywords or key phrases can be customized to allow the firm to control which words or phrases are flagged and to adjust them as the business changes or new risks emerge. The regulators will continue to penalize firms and their employees for failing to meet regulatory requirements, including fines and other disciplinary actions. For at least the past year, the Division received feedback indirectly from companies on their filing review experience. Staff Performance Measures, Appendix A - Control Self Assessment Methodology The Division also uses the number of filings reviewed to justify its budget staffing levels. review documents filed by registrants under the Securities Act of 1933 and the In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. We use cookies to personalize content and to provide you with an improved user experience. Do Not Sell or Share My Personal Information. 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 mean (median) number of comment letter rounds is 1.5 (1.0). They generally rated training on new releases as good. All rights reserved. Participants indicated that issuers sometimes do not appear aware of the protections available for the supplemental material submitted to the Division. Audit Results Their comments and the results of meetings to discuss the worksheets preceded the preparation of the audit report. The growing number and complexity of cybersecurity risks facing investment advisers (IAs) have triggered an increased interest in cyber risk management by the SEC, including a planned sweep of more than 50 registered IAs and broker-dealers. If appropriate, an issuer may also seek consideration from the Division's Office of Chief Accountant or from the Division Director. 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 . 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. 12-month period ended July 31. The applicable policy is dated August 19, 1997. Anonymous. Participants were generally pleased with the training they received. "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 . Please reach out to, Effective dates of FASB standards - non PBEs, Business combinations and noncontrolling interests, Equity method investments and joint ventures, IFRS and US GAAP: Similarities and differences, Insurance contracts for insurance entities (post ASU 2018-12), Insurance contracts for insurance entities (pre ASU 2018-12), Investments in debt and equity securities (pre ASU 2016-13), Loans and investments (post ASU 2016-13 and ASC 326), Revenue from contracts with customers (ASC 606), Transfers and servicing of financial assets, Compliance and Disclosure Interpretations (C&DIs), Securities Act and Exchange act Industry Guides, Corporate Finance Disclosure Guidance Topics, Center for Audit Quality Meeting Highlights, Insurance contracts by insurance and reinsurance entities, industry-specific SEC comment letter trends, {{favoriteList.country}} {{favoriteList.content}}. Thursday, May 5, 2022. Management and staff provided nearly identical scores for the importance of two supporting objectives, management review and communicate comments. 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. 1 The Commission is not implementing the supporting objective in a meaningful manner. 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. Background Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Audit Methodology We use cookies to personalize content and to provide you with an improved user experience. 12-month period ended July 31, 2022 (review year 2022 or the current At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. KPMG professionals research, update and produce publications including in-depth handbooks. 3 The Commission is generally not implementing the supporting objective. Our analysis of SEC comment letters issued in relation to Form 10-K and Form 10-Q filings identifies the frequency of topical areas addressed by the SEC staff and how their focus areas changed over time. Comments were received timely and the issuers were able to resolve their comments in time to execute their transactions. IPO and uses that cash, the equity of the SPAC, or both to fund the Given the recent amendments to the rules governing MD&A, we expect comments on this topic to remain high. 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