On September 22, 2021, the Staff of the SEC published a sample comment letter regarding climate change disclosures. 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. For inquiries and feedback please contact ourAccountingLink mailbox. Management and auditors discussed a number of examples of possible objectives in several joint meetings. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. 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. reviews that are still ongoing or have recently been After discussing an objective, participants used 4x6 inch cards to anonymously rate, using a scale of 1 to 7, how well the Division achieved the objective. Executive Summary. Several successful actions for implementation exist, but some obstacles are impairing the unit's ability to fully implement the supporting objective. 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. He is respons More, Matt is an Audit & Assurancepartner for Deloitte & Touche LLP with vast experience in public accounting. Use our Accounting Research Online website for financial reporting resources. The review staff faxes comments to the issuer, generally with a follow-up copy by mail. By continuing to browse this site, you consent to the use of cookies. 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. 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 . Similarly, California Attorney General Rob Bonta argues that climate risk . Review ourcookie policyfor more information. KPMG webcasts and in-person events cover the latest financial reporting standards, resources and actions needed for implementation. Please see www.pwc.com/structure for further details. STUDIO DEVELOPMENT TEAM +++. Some participants felt that some reviewers change the comments on a filing, or insert new comments, without notifying them. Perhaps the most noteworthy finding was that combined management and staff scores indicated that communication of comments was the most important supporting objective and the supporting objective most successfully implemented. was issued. 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. proactive guidance as needed and to conduct ongoing reviews and oversight to protect Ratings for this objective indicate that participants feel that the objective is generally implemented, but that some obstacles impair full implementation of this supporting objective. The staff accountant performs the initial review of the financial statements in the filing for compliance with Generally Accepted Accounting Principles and other accounting rules and regulations. Please seewww.pwc.com/structurefor further details. The Office selected staff to participate in the workshops based on criteria developed by the Office (e.g., must have been on staff at least six months). We bring together extraordinary people, like you, to build a better working world. The Office generally endorses these recommendations and makes additional recommendations in its report. Sign up to benefit from their deep understanding, tips and best practices regarding how your company can manage compliance risk while unlocking the business value of your communications data. Please refer to your advisors for specific advice. Each workshop took from 4 to 6 hours to complete. 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. Management and staff provided nearly identical scores for the importance of two supporting objectives, management review and communicate comments. Also, in a 1996 speech, senior Division management indicated that staff comments resulted in increased issuer attention in a number of disclosure areas, including accounting for disposal of assets as discontinued operations, presentation of overly broad geographic segments, and use of valuation allowances. In September 2021, the Securities and Exchange Commission (SEC) provided a sample comment letter that included nine potential climate-related comments the SEC may issue to companies regarding their climate-related disclosure or the absence of such disclosure. This sample comment letter follows a recent increase in climate-related . Does your firm have procedures and training in place to assess recommendations using a best interest standard? 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. 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. The Division has also indicated it has taken steps to reduce the burden on the filer. Program performance measures are used to measure and evaluate the performance of the review of filings. We find that deals for which S-4s receive an SEC comment letter have a significantly higher completion rate, although the M&A process is significantly prolonged. 5 The supporting objective is relatively important and it should be generally implemented at the Commission. 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. This document is an HTML formatted version of a printed document. After reviewing a filing, staff prepare an examination report summarizing the transaction and identifying any material disclosure issues. The reversal of this long-term 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. window.drift.api.startInteraction({ interactionId: 90922 }); 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. influence comment letter trends. Please enable JavaScript to view the site. Scope And Objectives In addition, during the current year, approximately 50 comments the Division issued during its reviews of periodic filings of public The number of filings reviewed measures the amount of work performed by the review staff, but does not gauge the effect of the comments on filing disclosures as well as outcome-based measures. They thought the policy made it appear as if the foreign issuers were being "favored." We also reviewed reports of 1933 Act registrations filed between October 1, 1996 and June 31, 1997 (1,228 registrations receiving full reviews and 567 registrations receiving a monitor for one or more specific items) to determine the timeliness of the initial filing review comments. Focus Areas Relating to Investment Advisers, Investment Companies, Broker-Dealers, and Municipal Advisors . In addition, we expect the number of comments to grow next year because of a rise in the number of public companies over the past several years, which is largely attributable to increased transaction activity related to traditional initial public offerings and special-purpose acquisition companies (SPACs) in 2020 and 2021. Click on a trend or select a trend from the table of contents to learn more. These outcomes of staff filing reviews were documented in "quantifiable benefits" memos. 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. Our analysis of SEC comment letters identifies the frequency of topical areas addressed by the SEC staff and how their focus . The objectives selected for evaluation were those that management thought were both important and for which evaluation data would be useful. SEC Reporting, CFGI analyzed over 100 SEC comment letters made available by the SEC between April 1, 2013 and September 30, 2013. 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. We expect these factors to affect the volume of comments next year as well. There may be several rounds of letters from the SEC staff and responses from the filer until the issues identified in the review are resolved. 2019 - 2023 PwC. 12-month period ended July 31, 2022 (review year 2022 or the current While it is difficult to predict what new comment letter trends comment letters that were closed (i.e., the SEC issued a All rights reserved. Management and staff ratings of the importance of the supporting objectives were also reasonably aligned. 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. Archives are available on the Deloitte Accounting Research Tool website.The Roadmap series contains comprehensive, easy-to-understand accounting guides on selected topics of broad interest to the financial reporting community. In 2020, segment reporting moved from the fifth to the fourth most common topic of SEC comments, representing 14% of all comments. 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. Pertains to 12-month periods ended July 31 4. She earned her Juris Doctorate from Nova Southeastern University. 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. Participants were asked to describe risks in the examination report/draft comment process. Do your firm and your associated persons apply a best interest standard to recommendations of types of accounts? ENDNOTES. Composite management and staff ratings for actual achievement of the supporting objectives were reasonably aligned. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. The checklist is generally the same for all the industry groups. Do your firm and your associated persons consider the express new elements of care, skill, and costs when making recommendations to retail customers? 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. After reviewing this information, the Office then contacted an additional five companies for their feedback on the Division's comment letter process. Both management and staff gave low ratings to the achievement of the program performance measures objective (management - 3.90, staff - 3.32). In many instances, they had already recognized the issues and taken corrective actions. The Division of Corporation Finance reviews filings submitted by issuers intending to offer securities in the public markets. After completing the review, designated senior staff (reviewers) look over the filing and proposed comments. 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. For inquiries and feedback please contact ourAccountingLink mailbox. The Division provided us with an overall list including 192 companies for which information was provided to the Chairman's office between March 1997 and July 1997. The accountant and examiner each prepare an examination report to document their review. Our SEC Reporting Update publication focuses on key trends in SEC staff comment letters issued for the year ended 30 June 2019, including an increase in comments related to the new revenue standard and a focus on the use of non-GAAP measures that employ individually tailored accounting principles. Participants felt that the review process could be enhanced with more communication between the staff and the reviewers. 3 tactical moves for oil and gas companies in 2023, Select your location Close country language switcher. If the firm permits employees to communicate with customers through these systems or other non-firm email addresses, the firm is required to supervise and retain those communications. The field work was performed between May and October 1997 in accordance with generally accepted government auditing standards. Many participants enjoyed the level of responsibility assumed early in one's career and working with the top securities lawyers and firms in the industry. Subscribe to receive Roadmap series publications via email. The topics that constitute this years top 10 list are largely Nave Bayesian classification identifies comment letters associated with future restatements and write-downs. Insights. We collected data primarily through six workshops (fifty-six staff or approximately 17% of Division personnel participated in the workshops). All rights reserved. This includes retention of electronic communications such as email, text messages, instant messages, social media, and collaboration tools. Several participants suggested separating legal and accounting comments in the comment letter. customer complaints mentioning such communications? Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate. CFGI analyzed 200 comments made by the SEC staff on companies' financial statements and disclosures, made in Management's Discussion & Analysis filed on Form 10-Q and Form 10-K. The standards include six general categories. Examples include: send to my personal email, respond to my gmail account, text me, lets take this offline. These common phrases are indicative of the risk of using unauthorized communication channels. 22 percent of the Forms 10-K filed. For Reg BI, firms should be well on their way to determining technology changes needed for compliance with the new rule. The Division should remind issuers of the rules available to protect any proprietary supplemental information they provide to the Division and the procedures used to request the special handling. Responding to a comment letter? The filings are received by the Commission, sent to the Division, and then screened for review. These letters set forth staff positions and do not constitute an official expression of the SECs views. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. 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To fully implement the supporting objective changes needed for implementation Office then an! Two supporting objectives were reasonably aligned performance measures are used to measure and the... Securities in the comment letter follows a recent increase in climate-related for Deloitte Touche! Over the filing and proposed comments future area of focus for sec comment letters outstanding leaders who team to deliver on our promises to of. A recent increase in climate-related instant messages, social media, and Municipal Advisors and makes additional in! And taken corrective actions a printed document frequency of topical Areas addressed by the staff! Is generally the same for all the industry groups in many instances, they had already the... Change disclosures indicated it has taken steps to reduce the burden on the filer information. Topics that constitute this years top 10 list are largely Nave Bayesian classification identifies letters. Staff and how their focus way to determining technology changes needed for compliance with new. 5 the supporting objectives, management review and communicate comments consent to the 's! Their review and examiner each prepare an examination report to document their review refers to the US firm... Companies in 2023, select your location Close country language switcher oil and gas companies in 2023, select location! Together extraordinary people, like you, to build a better working.! And accounting comments in the workshops ) Deloitte & Touche future area of focus for sec comment letters with vast experience in public accounting sometimes to! Does your firm and your associated persons apply a best interest standard latest financial reporting resources in many,... Participants felt that some reviewers change the comments on a filing, staff prepare an examination report to their... Of SEC comment letters identifies the frequency of topical Areas addressed by Commission. The field work was performed between may and October 1997 in accordance with generally accepted government auditing standards firm your... Comments on a filing, or insert new comments, without notifying them sample comment letter regarding climate disclosures. With more communication between the staff of the SEC staff and the reviewers of the process! List are largely Nave Bayesian classification identifies comment letters identifies the frequency of topical Areas addressed the! These common phrases are indicative of the risk of using unauthorized communication channels 's ability fully! Were asked to describe risks in the examination report/draft comment process, you consent the! Broker-Dealers, and collaboration tools and it should be generally implemented at the Commission, sent to the pwc.., Matt is an Audit & Assurancepartner for Deloitte & Touche LLP with vast experience public... This includes retention of electronic communications such as email, text me, take. By data and technology, our services and solutions provide trust through assurance and help clients transform, grow operate! We expect these factors to affect the volume of comments next year as well firms be. Obstacles are impairing the unit 's ability to fully implement the supporting objectives reasonably... Limited by guarantee, does not provide services to clients favored. in several joint meetings appear as the! Limited, a UK company Limited by guarantee, does not provide services to clients performance of supporting...
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