Updates to the Financial Reporting Manual. The Division of Corporation Finance has revised its Financial Reporting Manual as related to the pro forma impact of adopting new accounting standards; addressing the adoption of new accounting standards after EGC status is lost; and clarifying effective dates for ASU No. 2014-09 and ASU No. 2016-02 for certain public business entities. (12/1/2017)
SEC updates accounting guidance to conform to FASB’s accounting for investments in equity securities. The SEC published a staff accounting bulletin that revises portions of the interpretive guidance included in the Staff Accounting Bulletin Series to conform with the Financial Accounting Standards Board Accounting Standards Codification Topic 321, Investments – Equity Securities. The new bulletin will become effective upon publication in the Federal Register. (11/29/2017) Staff Accounting Bulletin No. 117
DERA publishes new FAQs on interactive data disclosure. The SEC’s Division of Economic and Risk Analysis updated its guidance on the SEC’s interactive data disclosure rules to include additional information on selecting the most appropriate element from the U.S. GAAP Taxonomy for specific disclosures. (11/3/2017) DERA FAQs.
No-Action Relief and Exemptive Orders
SEC grants NRSROs conditional temporary exemption from Securities Exchange Act requirements. The SEC extended a conditional exemption exempting nationally recognized statistical rating organizations from complying with Securities Exchange Act of 1934 Rule 17g-5(a)(3) with respect to rating covered transactions. (11/22/2017)
Division grants fund limited exemptions from Regulation M, Rules 101 and 102. The SEC’s Division of Trading and Markets granted a conditional exemption from Regulation M, Rules 101 and 102 to persons who may be deemed to be participating in a distribution of shares of the Vanguard Total Corporate Bond ETF Fund. (11/7/2017)
Selected Enforcement Actions
Audit firm charged with gatekeeper failures and fraud. The SEC announced that it has charged an audit firm, its two owners, several current and former partners, and a former audit manager with audit failures and failing to conduct adequate review of the financial statements in connection with the audits of three microcap companies that were later charged with fraud. Without admitting or denying the allegations, two of the partners settled the charges by consenting to the entry of cease-and-desist orders and agreeing to pay $15,000 civil penalties. One partner also agreed to a two-year practice suspension, and the other partner agreed to a three-year practice suspension. The proceedings against the remaining respondents are ongoing. (12/4/2017) In the Matter of Anton & Chia, LLP, Gregory A. Wahl, CPA, Michael Deutchman, CPA, Georgia Chung, CPA, and Tommy Shek, CPA, SEC Release No. 34-82206.
SEC’s new Cyber Unit brings charges in fraudulent coin offering. The SEC announced charges against an individual, his company, and his partner in connection with a fraudulent initial coin offering. In the first enforcement action filed by its new Cyber Unit, the SEC alleged that the defendants marketed and sold digital tokens on the internet to investors by claiming that investments in the securities would yield a 1,354 percent profit in less than 29 days. The SEC charged the three defendants with violating the anti-fraud provisions of federal securities laws, and additionally charged the individual and his company with violating the registration provision. (12/4/2017) SEC press release.
Speeches and Statements
OCA staff discusses current activities and issues at accounting conference.SEC Chief Accountant Wesley R. Bricker issued a statement that describes the discussions that took place between Bricker and other staff of the SEC’s Office of the Chief Accountant during a panel discussion at the 2017 AICPA Conference on Current SEC and PCAOB Developments. (12/4/2017) Bricker statement.
Clayton addresses annual conference on US Treasury market structure. SEC Chairman Jay Clayton discussed regulatory coordination, the importance of trading data to regulators, and the SEC’s approach to the future regulation of certain aspects of the fixed income markets at the Third Annual Conference on the Evolving Structure of the US Treasury Market. (11/28/2017) Clayton remarks.
Clayton declines to delay CAT. SEC Chairman Jay Clayton refused to grant a request submitted by the national securities exchanges and the Financial Industry Regulatory Authority to extend the deadline to comply with the data reporting requirements of the Consolidated Audit Trail, which became effective on November 15, 2017. (11/14/2017) Clayton statement.
Bricker discusses new accounting standards and blockchain technology at financial reporting conference. Speaking at the Financial Executives International 36th Annual Current Financial Reporting Issues Conference, SEC Chief Accountant Wesley R. Bricker addressed the transition to the new accounting standards on revenue, leases, and credit losses; amendments to the information provided in the independent auditor’s report; and the effect of blockchain technology on financial reporting. (11/14/2017) Bricker remarks.
Peikin discusses SEC’s approach to FCPA investigations. SEC Division of Enforcement Co-Director Steven R. Peikin reflected on the past, present, and future of SEC enforcement of the Foreign Corrupt Practices Act at an event at the New York University School of Law, including how the US Supreme Court’s decision in Kokesh v. SEC may require the SEC to speed up FCPA investigations. (11/9/2017) Peikin remarks.
Clayton emphasizes transparency during conference remarks. In remarks at the PLI 49th Annual Institute on Securities Regulation, SEC Chairman Jay Clayton discussed the rationale behind shortening the SEC’s near-term agenda and outlined SEC priorities related to transparency, including possible reforms to the proxy process, fee disclosures, enforcement in the penny stock market, and the regulation of initial coin offerings. (11/8/2017) Clayton remarks.
Investor Advisory Committee to meet in December. The SEC’s Investor Advisory Committee will meet on December 7, 2017, to discuss a subcommittee recommendation regarding electronic delivery of information to retail investors; retail investor protections and transparency in municipal and corporate bond markets; cybersecurity risk disclosures; dual-class share structures; and retail investor disclosure. SEC meeting notice.
OIG semiannual report. The SEC’s Office of Inspector General published its semiannual report to Congress, which describes the audits, evaluations, investigations, and other reviews of the SEC’s work it has conducted during the six-month period between April 1, 2017, and September 30, 2017. (12/1/2017) OIG report. See also the accompanying management report.
SEC Government-Business Forum on Small Business Capital Formation. The SEC’s 36th Annual Government-Business Forum on Small Business Capital Formation took place on November 30, 2017, at the University of Texas at Austin, and included panel discussions exploring how capital formation options are working for small businesses. SEC press release. In his opening remarks, SEC Chairman Jay Clayton indicated that the SEC will consider adopting new rules in the next few months to expand the definition of “smaller reporting company” to allow more companies to take advantage of scaled disclosure requirements. Clayton remarks.See also remarks by SEC Commissioners Michael S. Piwowar and Kara M. Stein.
SEC takes action to legitimize ALJ appointments. The SEC issued an orderratifying its prior appointment of its administrative law judges in an effort to resolve concerns that administrative proceedings presided over by its ALJs violate the Appointments Clause. (11/30/2017) SEC press release.
Staff announcements. The SEC announced that Mark Kronforst, Chief Accountant of the SEC’s Division of Corporation Finance, plans to leave the SEC in early 2018 after 13 years of service. (11/30/2017) The SEC also announced that Paul G. Cellupica has been named Deputy Director of the Division of Investment Management. (11/20/2017)
SEC Enforcement Manual. The SEC’s Division of Enforcement published an updated Enforcement Manual. (11/28/2017) SEC Enforcement Manual.
Money market fund statistics. The SEC’s Division of Investment Management revised its money market fund statistics to include data as of October 31, 2017. (11/20/2017) Money market fund statistics.
Division of Enforcement releases annual report. The SEC’s Division of Enforcement published a report detailing its priorities for next year and reviewing its enforcement results during fiscal year 2017. (11/15/2017) SEC press release.
Annual report on whistleblower program. The SEC issued its annual report to Congress on its whistleblower program, which showed, among other things, that the SEC awarded 12 whistleblowers nearly $50 million during fiscal year 2017. (11/15/2017) SEC whistleblower program report.
SEC Agency Financial Report. The SEC issued a report that provides detailed information about the agency’s financial performance results for fiscal year 2017, as well as an overview of the SEC’s performance as related to its strategic goals. (11/13/2017) SEC Financial Report.
SEC forms Fixed Income Market Structure Advisory Committee. The SEC formally established the Fixed Income Market Structure Advisory Committee, which will advise the SEC on the efficiency and resiliency of the corporate bond and municipal securities markets. The Committee’s initial two-year term began on November 15, 2017. (11/9/2017) SEC press release.
OCIE finds compliance deficiencies during municipal advisor examinations. The SEC’s Office of Compliance Inspections and Examinations advised municipal advisors to educate themselves about their compliance obligations to address deficiencies in complying with regulatory obligations regarding registration, recordkeeping, and supervision. (11/7/2017) OCIE Risk Alert.
OIG audit of SEC’s compliance with DATA Act. The SEC’s OIG released the findings of its audit of the SEC’s compliance with the Digital Accountability and Transparency Act for fiscal year 2017. (11/7/2017) OIG report.