The SEC’s Office of the Inspector General recently audited the work carried out by Corp Fin’s Disclosure Review Program in the 2023 and 2024 fiscal years. Yesterday, it issued a 22-page report with the results of the audit. Here are the 3 main recommendations:

• Update policies and internal guidance to (a) require that staff document the reasons and relevant risk factors for conducting elective annual report reviews, (b) provide clear direction for scoping annual report reviews, and (c) require that staff document scoping decisions.

• Coordinate with the SEC’s Office of the General Counsel to finalize Sarbanes-Oxley Act of 2002 section 408 guidance, including a description of all six factors to be considered and an interpretation of the minimum review period mandate.

• Consider developing a plan that prioritizes DRP goals and requirements in the event of significant staffing decreases and/or significant workload increases.

The DRP is a big task for Corp Fin, and it’s staffed with nearly 300 employees. In order to comply with the Sarbanes-Oxley Act requirement to review filings on a “regular and systemic basis,” the DRP annually selects for review a portion of the 7,400 annual reports that are filed by public companies – as well as selected transactional filings. The intent is that each company will cycle through a review at least once every 3 years.

The report says that the purpose of the Inspector General’s audit was to assess whether the DRP uses a risk-based process to concentrate resources on critical disclosures, and whether it is meeting its statutory requirements. The OIG says its recommended improvements are important for several reasons:

• Staff turnover may lead to a loss of institutional knowledge

• Potential new rules for crypto assets and other issues may create issues warranting the DRP’s attention

• The current regulatory environment may increase new issuer transactional filings

The Inspector General also encouraged the DRP management to leverage automation and technology where feasible and advisable – with a separate report on the SEC’s information technology systems. The report is full of good info about how the DRP was organized and staffed during the audit period, recent comment letter trends, and more.

We also give an overview of how Corp Fin’s Disclosure Review Program works – and how to respond to the comments that you might receive when it’s your company’s turn for review – in our “SEC Comment Letter Process Handbook.” If you do not have access to our Handbooks, Checklists, and all of the other practical guidance that is available here on TheCorporateCounsel.net, try a no-risk trial now. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.

– Liz Dunshee