Tune in tomorrow for the webcast – “Shareholder Proposals: Corp Fin Speaks” – with Corp Fin’s Matt McNair, who has headed the Division’s “Shareholder Proposal Task Force” for the past five years. Tune in to learn the experiences with implementing Staff Legal Bulletin 14I from this past proxy season – and learn the intricacies of new SLB 14J.
SEC Enforcement: Number of Actions Tripled in Last Six Months
Last month, John blogged about the Enforcement Division’s annual report on its activities – and how the SEC disputed calculations that showed a significant decline in actions over the last couple of years. This annual study from Cornerstone Research & NYU, which was released yesterday and breaks out the numbers for public companies, seems to support the SEC’s view – it shows that SEC enforcement actions more than tripled in the second half of the fiscal year, reversing the decline that began in 2017. In announcing the results of their study, the researchers highlighted these findings (also see this “D&O Diary” blog):
– The last quarter of FY 2018 saw the highest number of public company and subsidiary actions that also named individuals as defendants in a single quarter tracked by the Securities Enforcement Empirical Database (SEED).
– The SEC continued to bring the substantial majority (85 percent) of actions against public companies and subsidiaries as administrative proceedings in FY 2018. In contrast, the majority (55 percent) of actions without public companies or subsidiaries were filed as civil actions in FY 2018.
– Almost half (45 percent) of public company and subsidiary actions involved Broker Dealer or Investment Advisor/Investment Company allegations. This is consistent with the SEC’s focus on retail investors and the launch of its Retail Strategy Task Force at the end of FY 2017.
– More than half (61 percent) of public company and subsidiary defendants cooperated with the SEC during the fiscal year. This marked the fourth fiscal year in a row in which more than half of public company and subsidiary settlements noted some form of cooperation.
– The SEC imposed monetary penalties in nearly all (89 percent) of its FY 2018 settlements with public companies and subsidiaries. This percentage is consistent with the FY 2010–FY 2017 average of 84 percent.
More on “Comment Trends: Corp Fin’s ‘Top 10′”
Not too long ago, I blogged about trends in Corp Fin comment letters. We’ve since posted a few additional resources in our “Comment Letters” Practice Area – including this interactive summary from PwC and this 191-page roadmap from Deloitte.
This Audit Analytics blog reiterates that the overall number of comment letters has been declining for nearly a decade – but companies should stay attuned to perennial favorites (MD&A, non-GAAP) & trending topics (revenue recognition). The blog is particularly helpful because it includes sample comments – like these, which deal with revenue recognition:
– We note your disclosure regarding three performance obligations under your franchise agreements. It appears that you have concluded that these items are not distinct and therefore are not separate performance obligations given your conclusion that they are highly interrelated. Please revise your disclosure to clarify your conclusions. Reference 606-10-25-22.
– Please revise your disclosure to provide your accounting policy on revenue recognition as a result of your implementation of FASB ASC 606. Please refer to the guidance in FASB ASC 606-10-50 and Article 10 of Regulation S-X.
– Please revise your disclosure to provide your conclusion on the effectiveness or ineffectiveness of your Disclosure Controls and Procedures. In addition, please provide a detailed discussion on how the non-disclosure of your revenue recognition policy in the Form 10-Q affected your conclusion.
– Liz Dunshee