Course Level :Basic
Instructional Method :QAS Self Study
Advance Preparation :None
Published: June, 2022
SEC Segment 1: Structure and Authority
The U.S. Securities and Exchange Commission (SEC) was founded by President Franklin D. Roosevelt in 1934. It was created by Section 4 of the Securities Exchange Act of 1934 It is comprised of a large independent agency of the United States federal government that was created following the stock market crash in the 1920s to protect investors and the national banking system. The primary purpose of the SEC is to enforce the law against market manipulation.
The SEC created has created a host of regulations that they enforce:
The SEC has a three-part mission:
With the help of this CPE course, you can learn more about specific SEC structures, functions and responsibilities carried out by various divisions and offices within the Washington D.C. headquarters and regional offices around the country.
This CPE course focuses on the purpose and structure of the SEC and its role in financial accounting and reporting compliance for publicly traded companies. We will also do a high-level introduction to various important forms to file with the SEC. A deep dive into many of these forms will be completed in a separate webinar.
SEC Segment 2: Mandates and Programs
As outlined in our introductory course to Understanding the SEC, there are many compliance rules and regulations that publicly traded companies must follow. In addition, the SEC has far-reaching powers in the oversight of the various legislations and can assess penalties for companies (or accounting firms), who do not adequately comply with those mandates.
While most violations of securities laws are enforced by the SEC and the various securities regulatory organizations it monitors, state securities regulators can also enforce statewide securities blue sky laws. The SEC also works with federal and state law enforcement agencies to carry out actions against actors alleged to violate the securities laws.
SEC Segment 3: Focus on Regulation S-K, S-X, and Form 8-K
As part of the SEC's mission to protect investors, the SEC outlines an abundance of reporting requirements for publicly traded companies. This course will delve into Regulation S-X, S-K, and 8K which lays out reporting requirements for various SEC filings used by public companies.
Regulation S-X is a prescribed regulation in the U.S. that lays out the specific form and content of financial reports, specifically the financial statements of public companies. Regulation S-X extends the meaning of the term 'financial statements to include all notes to the statements and all related schedules. Regulation S-X is closely related to Regulation S-K and lays out reporting requirements for various SEC filings and registrations used by public companies. Regulation S-X profoundly affects internal and external accountants, auditors and officers, and numerous officials, employees, and contractors of publicly reporting companies. Because of the need for accurate reporting, any operation of a company may be affected to require ultimate compliance with Regulation S-X and the Sarbanes-Oxley Act.
In a company's history, Regulation S-K first applies with the Form S-1 that companies use to register their securities with the SEC as the “registration statement” under the SEC Act of 1933. Thereafter, Regulation S-K applies to the ongoing reporting requirements in documents such as Forms 10-K and 8-K.
Regulation S-K applies to:
A public company is initially impacted by Regulation S-K with its IPO (initial public offering of shares). Form S-1 contains the basic business and financial information on an issuer concerning a specific securities offering. Investors may use the prospectus to consider the merits of an offering and make educated investment decisions. A prospectus is one of the main documents used by an investor to research a company before an initial public offering.
An 8-K is a report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the SEC. Also known as a Form 8K, the report notifies the public of events, including acquisitions, bankruptcy, the resignation of directors, or changes in the fiscal year.
This CPE course will provide the participant with an overview of the SEC filing and financial reporting requirements related to Regulation S-K from the accountant's perspective. We will discuss elements that accountants and auditors must be aware of when preparing those filings as well as obtain an understanding of reference materials available. This includes a discussion of the various sections of regulation S-X and S-K and 8K.
SEC Segment 4: Focus on 10-K and 10-Q
A 10-K is a comprehensive report filed annually by a publicly-traded company about its financial performance and is required by the SEC. The report contains much more detail than a company's annual report which is sent to its shareholders before an annual meeting. Some of the information a company is required to document in the 10-K includes its history, organizational structure, financial statements, earnings per share, subsidiaries, executive compensation, and any other relevant data.
The SEC requires this report to keep investors aware of a company's financial condition and to allow them to have enough information before they buy or sell shares in the corporation, or before investing in the firm’s corporate bond.
The 10K includes five distinct sections:
The SEC form 10-Q is a comprehensive report of a company's performance that must be submitted quarterly by all public companies to the SEC. The 10Q is generally an unaudited report.
In the 10-Q, firms are required to disclose relevant information regarding their financial position. There is no filing after the fourth quarter because that is when the 10-K is filed. There are two parts to a 10-Q filing. The first part contains relevant financial information covering the period. This includes condensed financial statements, management discussion, an analysis of the financial condition of the entity, and disclosures regarding market risk and internal controls.
Accountants and auditors must understand all aspects and requirements of the 10K and 10Q process including an understanding of how specific regulations like Sarbanes-Oxley and others are embedded within these statements.
Because of the depth and nature of the information they contain, 10-Ks are fairly long and tend to be complicated. But investors must understand that this is one of the most comprehensive and most important documents a public company can publish yearly. It is also critical to understand the requirements and expectations of form 10Q.
SEC Segment 5: Rulemaking and Enforcement Process
The Commission's rulemaking process is intended to ensure that aspects of regulatory changes are analyzed before a change takes effect. A need for rulemaking can be identified internally by the Commission or externally by Congress, another government agency, private industry, or the general public.
The rulemaking process usually begins with a rule proposal. , If the Commission approves the rule proposal, it is then presented to the public (through publication in the Federal Register and on the Commission's website) for a specified period. The public's input is considered as a final rule is crafted. Rules are adopted by a vote of the full Commission.
The Office of the Secretary (OS) reviews rules for compliance with Federal Register requirements, sends related documents to various agencies involved in the process, issues official rulemaking documents, coordinates Commission approval of rules, and maintains certain rule-related files. OS also receives and organizes public comments and then forwards them to the Office of Filings and Information Services (OFIS) and the relevant division staff.
The Division of Enforcement was created in August 1972 to consolidate enforcement activities that previously had been handled by the various operating divisions at the Commission's headquarters in Washington. The Commission's enforcement staff conducts investigations into possible violations of the federal securities laws and litigates the Commission's civil enforcement proceedings in the federal courts and administrative proceedings.
The Commission's mandate is to protect investors. The Commission is not authorized to act on behalf of individual investors. The Commission can bring a variety of administrative proceedings, which are heard by hearing officers and the Commission. One type of proceeding, a cease and desist order, may be instituted against any person who violates the federal securities laws. Concerning regulated entities (e.g., brokers, dealers, and investment advisers) and their employees, the Commission may institute administrative proceedings to, among other things, revoke or suspend registration, or to impose bars or suspensions from employment. In both cease-and-desist proceedings and administrative proceedings against regulated persons, the Commission is authorized, among other things, to order the payment of civil penalties and disgorgement of ill-gotten gains.
This CPE webinar is to provide an understanding of the SEC’s responsibilities related to rulemaking and enforcement of rules related to the financial markets. We will examine the rulemaking process and the enforcement process that all accountants and auditors must understand to ensure proper compliance with SEC laws.
This CPE webinar is a part of a series of five webinars:
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Owner, Lynn Fountain Consulting and Training
Lynn Fountain has over 39 years of experience spanning public accounting, corporate accounting and consulting. 20 years of her experience has been working in the areas of internal and external auditing and risk management. She is a subject matter expert in multiple fields including internal audit, ethics, fraud evaluations, Sarbanes-Oxley, enterprise risk management, governance, financial management and compliance. Lynn has held two Chief Audit Executive (CAE) positions for international companies. In one of her roles as CAE, she assisted in the investigation of a multi-million-dollar fraud scheme perpetrated by a vendor that spanned 7 years and implicated 20 employees. The fraud was formally investigation by the FBI and resulted in 5 indictments estimating a $13M fraud loss.
Ms. Fountain is currently engaged in her own consulting and training practice. She has successfully executed on several consulting assignments spanning areas of accounting, risk, ERM and internal audit. She is a highly sought-after trainer and international speaker and has produced hundreds of courses delivered through seminars, conferences and on-demand training. She is the author of three separate technical books.
Fountain obtained her BSBA from Pittsburg State University and her MBA from
Washburn University in Kansas. She has her CPA, CGMA, CRMA credentials.
Ms. Fountain has become known as an international trainer on topics of Leadership, Internal Audit, Accounting, Finance, Ethics, Business Processes, Bookkeeping, Cybersecurity and Business Issues. She has over 150 training topics that can be tailored to meet your needs.