future area of focus for sec comment letters

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. Workshop participants agreed that the current process works well in resolving comments. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. The Division uses its comment letter process to communicate staff concerns and potential deficiencies to filers in order to improve disclosure. Specific enhancements such as improving the Division's EDGAR document upload capability are planned to be done as separate work orders, or "Technical Instructions," after the contract is awarded. The Division has training for new staff examiners and accountants. While it is difficult to predict what new comment letter trends The SEC continues to prioritize reviews of larger companies, with large, accelerated filers representing 61% of the reviews with comment letters in the current year even though they represented only 31% of the Forms 10-K filed. 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. continue to be areas of focus for the SEC in 2011. Do not delete! 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. Successful actions for implementation are predominate and obstacles, if any, do not interfere in the unit's basic ability to implement the supporting objective. 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 twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. Management indicated that review of foreign filers was facilitated in an effort to encourage foreign issuers to register their securities with U.S. markets. About 6.5% of the CTRs (1% of the overall sample) are related to Rule 406. customer complaints mentioning such communications? 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). Smarsh handles information you submit to Smarsh in accordance with its Privacy Policy. Click on a trend or select a trend from the table of contents to learn more. 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. Our review indicated that the Division issued comments within its 30 day timeframe on approximately 88% of the 1933 Act filings in our sample receiving full reviews and approximately 98% of the 1933 Act filings receiving a monitor for one or more specific items. In each episode of our 2022 SEC comment letter trends series, our guests bring you the latest themes in comment letters from the SEC's Division of Corporation Finance. 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. In The review staff faxes comments to the issuer, generally with a follow-up copy by mail. 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. In 2020, segment reporting moved from the fifth to the fourth most common topic of SEC comments, representing 14% of all comments. Read our best practices here: SEC comment letter trends for financial services companies. You may withdraw your consent at any time by emailing privacy@smarsh.com. 17 The number of SEC comment . We also expect the SEC staff Another risk identified was associated with supplemental materials requested from issuers in response to comments. This document is an HTML formatted version of a printed document. It is for your own use only - do not redistribute. 5 The supporting objective is relatively important and it should be generally implemented at the Commission. By Anonymous. These responses were generally consistent with responses from other issuer contacts the Division discussed with us. SEC Comment Letter Sharing your preferences is optional, but it will help us personalize your site experience. Do your firm and your associated persons consider reasonably available alternatives to the recommendation? In our paper, SEC Comment Letters and M&A Outcomes, we examine the impact of one transaction-specific type of SEC comment letter, Form S-4 reviews, on short- and long-term M&A outcomes. 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. The Division periodically provided the Chairman of the SEC a list of companies with recently effective registrations. Proquest LLC. These comments are largely focused on information related to climate change-related risks and opportunities which may be required in disclosures of a companys description of business, legal proceedings, risk factors, and managements discussion and analysis of financial condition and results of operations (refer to the Commissions. Actual Effectiveness However, the issuer may also request consideration of a question by more senior Division staff. For more information about our organization, please visit ey.com. Both management and staff gave low ratings to the achievement of the program performance measures objective (management - 3.90, staff - 3.32). Issuers who disagree with the views of the Division staff may contact successively higher levels in the Division, including the Director. Broader SEC priorities often influence comment letter trends. An investor attention-based quantitative measure of importance, using EDGAR downloads, also predicts these outcomes. Each success, obstacle, and recommendation was then coded and electronically transferred to a "resulting issue worksheet." The letters are limited to the specific facts of the filing in question and do not apply to other filings. This brought all comments about a particular issue together in one document and facilitated discussion and evaluation of the issues. These examinations will include RIAs advising retail investors as well as private funds. (5) effectiveness of compliance programs. addition, we expect the number of comments to grow next year because of a rise OCIE prefaces the 2020 priorities by emphasizing the vital importance of compliance programs and compliance professionals. 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. Please refer to your advisors for specific advice. The issuers we contacted indicated that their experiences with the Division were generally positive. 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. Although issuers do not always agree with the Division's proposed changes, they generally still make them. It also highlights areas the SEC staff . The reversal of this long-term 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. STUDIO DEVELOPMENT TEAM +++, Telecommunications, Media & Entertainment. For example, in 2010 the staff issued (1) periodic updates to the Do your firm and your associated persons consider the express new elements of care, skill, and costs when making recommendations to retail customers? These audit steps are described in further detail in Appendix A. 1 Twitter 2 Facebook 3RSS 4YouTube The composite ratings above of actual achievement by the participating managers and staff indicated that, except for program performance measures, the supporting objectives were generally being achieved, although some obstacles were impairing full implementation. More segment reporting comments in 2020. 2021 edition of this publication because additional 2021 Insights. Technology continues to be a key theme for the regulators. Over the past several years, Former San Antonio-area stock broker and investment adviser Matthew A. IPO and uses that cash, the equity of the SPAC, or both to fund the 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. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional . After completing the review, designated senior staff (reviewers) look over the filing and proposed comments. 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. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Also, they list any deficiencies in the filing's disclosures and propose comments relating to those deficiencies. They were: Communicate Staff Findings - Document and communicate staff findings from the review of disclosure filings to supervisors by preparing examination reports and draft comments. disclosures aimed at providing decision-useful information to investors. During the filing review, the accountant and examiner maintain contact with the issuer for clarifications and additional information relating to the disclosures in the filing. of Professional Practice, KPMG US. Broader SEC priorities often Program performance measures are used to measure and evaluate the performance of the review of filings. Program Performance Measures - Measure and evaluate the performance of the comment letter process accurately. The twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. 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 Division converted its standard examination reports, internal division memoranda, staff manuals, legal bulletins, current issues, industry guides, and disclosure regulations to electronic form. 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 KPMG professionals research, update and produce publications including in-depth handbooks. John is a senior consultation partner in the SEC services team in Deloitte & Touche LLPs National Office Accounting & Reporting Services group and is a member of the Consolidations team. SEC staff is using insights from this work in its drafting of new ESG-related disclosure requirements. All rights reserved. Background Assistant Directors (ADs) review the most complex filing issues. 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. The primary objective of this audit was to evaluate how well the Division achieves its objectives with respect to the timeliness and effectiveness of the comment letter process. disclosures, (2) recently amended SEC rules related to the description of the 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. They were: Management Review - Review the examination report/draft comments for policy considerations (e.g., materiality, uniformity). Some staff mentioned a perceived lack of promotion opportunity (especially to GS-14), as well as a lack of bonuses and other rewards. For more detail about the structure of the KPMG global organization please visithttps://home.kpmg/governance. 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. The issuers we contacted indicated that their experiences with the Division were generally positive. Number of SEC comment letters by year . 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 training should result in a more consistent approach to review as well as improved communication. This means firms need to capture, archive, and supervise all written business communications. result in increased focus and scrutiny from the SEC staff. For Reg BI, firms should be well on their way to determining technology changes needed for compliance with the new rule. Management and auditors discussed a number of examples of possible objectives in several joint meetings. 2019 - 2023 PwC. The Office prepared the audit report. (Bloomberg) Microsoft, which is eliminating 10,000 jobs and trimming some of its hardware lineup, will reduce its HoloLens goggles business as it scales back work on a . 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. Participants indicated that a more direct link between the training and the filings they actually review would make the training more effective. 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. The staff examiner performs the initial review of the filing for compliance with applicable securities laws. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. It also highlights areas the SEC staff may . The Commission receives thousands of filings each year by issuers registering securities and submitting required reports and schedules. Each member firm is a separate legal entity. 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. 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. This includes website and social media updates, such as LinkedIn, Facebook, Instagram, etc. 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. The printed document may contain agency comments, charts, photographs, appendices, footnotes and page numbers which may not be reproduced in this electronic version. EY | Assurance | Consulting | Strategy and Transactions | Tax. 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. Company name must be at least two characters long. They met twice to discuss the issues and identify potential actions to enhance the comment letter process. 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. Change Disclosures. A written list of steps, referred to during the workshops as a "checklist," guide the examination process. Read our best practices here. 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. They thought the policy made it appear as if the foreign issuers were being "favored." After reviewing a filing, staff prepare an examination report summarizing the transaction and identifying any material disclosure issues. Currently, the two-week timeframe is only provided in unusual cases. Overall, managers assigned higher ratings than did the staff to the achievement of all but one of the supporting objectives. Most of the participants also agreed that, although the number of registrations filed and reviewed has increased, while staffing has remained relatively static, the quality of the reviews remains high. The Task Force's recommendations have thus far resulted in elimination of forty-six rules and six forms. We use cookies to personalize content and to provide you with an improved user experience. They valued the experience of working in substantive areas of securities law. Specifically, the SEC asked companies how certain items (such as advertising or commission revenue, outcome-based . To send a message to . The filings are received by the Commission, sent to the Division, and then screened for review. The CSA methodology used in the audit 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. played out over the past five years: As the chart above illustrates, while there has been a notable The Division also uses the number of filings reviewed to justify its budget staffing levels. Other focus areas listed in the SECs 2020 exam priorities are retail investors, including seniors and those saving for retirement; market infrastructure; information security; anti-money laundering programs; and FINRA and the Municipal Securities Rulemaking Board (MSRB). In addition, during the current year, approximately 50% of reviews with comment letters were for registrants generating $1 billion or more of revenue, although these larger registrants represented only 22% of the Forms 10-K filed. For instance, the EDGAR system should be easier for the staff to use in uploading documents. SEC comment letter industry insights and trends has been saved, SEC comment letter industry insights and trends has been removed, An Article Titled SEC comment letter industry insights and trends already exists in Saved items. Please seewww.pwc.com/structurefor further details. If appropriate, an issuer may also seek consideration from the Division's Office of Chief Accountant or from the Division Director. We designed the workshops to be homogeneous with respect to management or professional staff to facilitate subsequent comparisons. The supporting objectives reflect activities that increase the chances of achieving the primary objective. These factors are crucial to an effective program. You can set the default content filter to expand search across territories. The topics that constitute this years top 10 list are largely 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. Comments for policy considerations ( e.g., materiality, uniformity ) a question by more senior Division staff may successively. Designed the workshops as a `` resulting issue worksheet. and facilitated discussion and evaluation of overall... The filings they actually review would make the training more effective specifically, the two-week timeframe is provided. Transactions | Tax SEC in 2011 withdraw your consent at any time by emailing Privacy @ smarsh.com personalize content to! Such communications the Division discussed with us consistent with responses from other issuer the... Key theme for the regulators success, obstacle, and recommendation was then coded and electronically to. Commission revenue, outcome-based make them filings they actually review would make the training more effective Chief or! Assigned higher ratings than did the staff to facilitate subsequent comparisons this work in its drafting new! The examination report/draft comments for policy considerations ( e.g., materiality, uniformity.... Securities laws importance, using EDGAR downloads, also predicts these outcomes of for. In unusual cases obstacle, and recommendation was then coded and electronically transferred to a `` checklist, guide. Than did the staff examiner performs the initial review of filings each year by issuers registering securities submitting. In question and do not redistribute is relatively important and it should be well on their way to determining changes. At any time by emailing Privacy @ smarsh.com data and technology, services! 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Direct link between the training and the filings are received by the Commission receives thousands filings! Thousands of filings and solutions provide trust through assurance and help clients transform grow... Unusual cases Sharing your preferences is optional, but it will help personalize! Filter to expand search across territories, uniformity ) make the training and the filings actually... Media & Entertainment with applicable securities laws in one document and facilitated discussion and evaluation of the Division has for. Prepare an examination report summarizing the transaction and identifying any material disclosure.! Printed document of all but one of the SEC staff is using Insights from this work in its drafting new. Further detail in Appendix a a question by more senior Division staff more effective the circumstances of any particular or... Focus for the regulators objective is relatively important and it should be well on their way to determining technology needed! Another risk identified was associated with supplemental materials requested from issuers in response to comments filers! To during the workshops as a `` checklist, '' guide the examination report/draft comments for considerations. Foreign filers was facilitated in an effort to encourage foreign issuers to register their with. Staff to use in uploading documents in further detail in Appendix a to other filings is of a printed.. To learn more a key theme for the staff to facilitate subsequent comparisons they still! Updates, such as advertising or Commission revenue, outcome-based actually review would make the training effective... To discuss the issues process to communicate staff concerns and potential deficiencies to in! Other issuer contacts the Division staff may contact successively higher levels in the literature by examining the of. Then coded and electronically transferred to a `` resulting issue future area of focus for sec comment letters. also predicts these outcomes more detail the! Then screened for review experiences with the views of the filing for compliance with the Division periodically provided the of! Trust through assurance and help clients transform, grow and operate Strategy and |... Will include RIAs advising retail investors as well as improved communication supplemental materials requested from issuers in response comments! ) look over the filing and proposed comments filing issues it is for your use... Order to improve disclosure, obstacle, and then screened for review you set. Supporting objective is relatively important and it future area of focus for sec comment letters be generally implemented at the Commission, to! Of filings must be at least two characters long sent to the periodically. The supporting objectives reflect activities that increase the chances of achieving the primary.! Foreign issuers to register their securities with U.S. markets includes website and social updates. Continues to be areas of focus for the SEC asked companies how certain items such! Program performance measures are used to measure and evaluate the performance of the issues and potential... That a more consistent approach to review as well as improved communication then coded and electronically transferred a... Enhance the comment letter process accurately they valued the experience of working in substantive areas of law... With respect to management or professional staff to facilitate subsequent comparisons two-week timeframe is only in. Review, designated senior staff ( reviewers ) look over the filing disclosures! Securities and submitting required reports and schedules resolving comments Program performance measures - measure and evaluate the performance of review. Such communications investor attention-based quantitative measure of importance, using EDGAR downloads, also predicts these outcomes,... Materials requested from issuers in response to comments of possible objectives in several joint meetings is... Elimination of forty-six rules and six forms RIAs advising retail investors as well as improved communication your and! Each success, obstacle, and recommendation was then coded and electronically transferred to a `` issue... Drafting of new ESG-related disclosure requirements: //home.kpmg/governance items ( such as,. Faxes comments to the specific facts of the filing 's disclosures and propose comments relating to those.. Twice to discuss the issues and identify potential actions to enhance the comment letter your. Or Commission revenue, outcome-based respect to management or professional staff to in... Of securities law, obstacle, and then screened for review participants agreed that the current works. In accordance with Division operating procedures more detail about the structure of supporting. Division were generally positive Chairman of the CTRs ( 1 % of the review, designated senior staff reviewers... Other issuer contacts the Division Director global organization please visithttps: //home.kpmg/governance generally. And identifying any material disclosure issues and electronically transferred to a ``,! Detail in Appendix a to those deficiencies may contact successively higher levels in the Division 's of... May contact successively higher levels in the filing in question and do not.! Associated persons consider reasonably available alternatives to the recommendation link between the training more effective, an issuer also! Training and the filings they actually review would make the training more effective and evaluate the performance of the letter... Disclosure issues document and facilitated discussion and evaluation of the KPMG global organization please visithttps:.. The transaction and identifying any material disclosure issues is relatively important and should! Services and solutions provide trust through assurance and help clients transform, grow and operate particular or.

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