They also indicated that the quality of the reviews sometimes suffered in the push to achieve numerical goals. Does your firm have procedures and training in place to assess recommendations using a best interest standard? Municipal advisor examinations will include review of registration and continuing education requirements and municipal advisor fiduciary duty obligations to municipal entity clients. Management reviews the examination report and draft comments for policy considerations such as materiality and uniformity with prior comments on similar issues. Participants also indicated that the result of their activities can be expressed better than relying solely on the number of filings reviewed.2 The Division has indicated that its reviews resulted in identification of novel and unique accounting issues, changes in industry practices, and changes in Generally Accepted Accounting Principles. This issue of On the Radar contains SEC comment letter considerations, including an update on SECs priorities; a summary of comment letter trends related to the top 10 topics of frequent comment; and future SEC disclosure priorities, including climate change, financial technology, and evolving risk. This departure from the traditional audit report comment process provided input at an earlier stage in the writing process. DTTL and each of its member firms are legally separate and independent entities. The accountant and examiner each prepare an examination report to document their review. This study examines the impact of SEC comment letters on future financial reporting outcomes and earnings credibility. At the beginning of each workshop, a senior manager from the Division introduced the workshop and provided background information on their purpose. to continue monitoring the effects of the COVID-19 pandemic, the Russia-Ukraine Some participants indicated that the 30 day timeframe to the first round of comments for domestic issuers and the two week timeframe which is sometimes given to foreign issuers did not appear equitable. 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. played out over the past five years: As the chart above illustrates, while there has been a notable Read our cookie policy located at the bottom of our site for more information. 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. 2023. we expect that the Commission will continue to focus on how registrants have The Division should communicate to the staff management's contention that it uses the number of filings reviewed as only one staff performance measure. The Government Performance and Results Act of 1993 (GPRA) requires agencies to develop outcome-based performance measures to gauge progress toward goals. A major goal of the audit was to maximize the value of the audit to management, while maintaining auditor independence. This means firms need to capture, archive, and supervise all written business communications. Andrew Vollmer, Mercatus Center Policy Brief: Does the SEC Have Authority to Adopt Climate-Change Disclosure Rules?, at 13 (August 2021) (because "questions about the country's response to climate change" "are major and contentious policy areas," any SEC rules in this area "would be misusing general rulemaking powers that Congress provided" to the SEC); Letter to SEC . In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. Read our cookie policy located at the bottom of our site for more information. The Division should develop a guide for reviewers to use in reviewing examination reports. The Workshops 2019 - 2023 PwC. Variable Consideration (ASC 606-10-32-5 through 32-9) 35 threads, 8.1 percent. Read our best practices here: SEC comment letter trends for financial services companies. Copyright 2023 Deloitte Development LLC. disclosures, (2) recently amended SEC rules related to the description of the The Office generally endorses these recommendations and makes additional recommendations in its report. In a sign of the significant increased focus on climate change that has taken place under the Biden administration, the Wall Street Journal recently reported that the SEC's Division of Corporation Finance has sent comment letters to "dozens" of companies relating to their climate change disclosures. Some participants felt that some reviewers change the comments on a filing, or insert new comments, without notifying them. Sub-elements relating to the comment letter process are distributed throughout the six general categories. proactive guidance as needed and to conduct ongoing reviews and oversight to protect 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. Please see www.deloitte.com/about to learn more about our global network of member firms. Staff requests futures comments when the improvements are not immediately consequential, but will improve disclosure. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. The Division communicates its comments to the issuer after the filing review to obtain appropriate improvements in disclosure. Information in this publication is based on annual reporting cycle, they may find it helpful to consider the following SEC OCIE prefaces the 2020 priorities by emphasizing the vital importance of compliance programs and compliance professionals. Select a section below and enter your search term, or to search all click The comparisons included analysis of management versus staff, actual achievement versus importance, and opportunities for improvement. 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. Senior and middle managers and support offices such as Chief Counsel and Chief Accountant should participate in training. The topics that constitute this years top 10 list are largely 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 develop outstanding leaders who team to deliver on our promises to all of our stakeholders. A number of the aforementioned trends are likely to continue in years to come. The participants agreed that, taken as a whole, the Division's comment letter process was achieving its primary objective to improve disclosure to investors. It is for your own use only - do not redistribute. Issuers and staff often discuss filing issues over the telephone throughout the review process. Similarly, California Attorney General Rob Bonta argues that climate risk . Quantitative Analysis 1 The supporting objective is not important and should not be implemented at the Commission. See Terms of Use for more information. 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. We For instance, the EDGAR system should be easier for the staff to use in uploading documents. 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. We also expect the SEC staff 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. The regulators will continue to penalize firms and their employees for failing to meet regulatory requirements, including fines and other disciplinary actions. They generally rated training on new releases as good. The mean (median) number of comment letter rounds is 1.5 (1.0). This sub-element requires a specific average number of "exams or other reviews per month." Approximately 19% of the comment letter conversations include a confidential treatment request from the firm to redact at least a portion of their response letter. These audit steps are described in further detail in Appendix A. In particular, examinations of registered investment advisers (RIAs) will focus on RIAs that have never been examined. To help the SEC meet its responsibilities under the Sarbanes-Oxley Act, The twenty comment letters we reviewed appeared to be prepared in accordance with Division operating procedures. of the Forms 10-K filed. 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. 1 The Commission is not implementing the supporting objective in a meaningful manner. Having 2023 be a year of focus on electricity, water, drainage and community needs will ensure a strong year of accomplishment that will have a direct impact on our citizens. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. 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