February 2025 Financial Reporting, Governance, and Risk Management
Message from Sydney Garmong, Partner, National Office
As with any new administration, we are observing changes in leadership at federal agencies and accompanying policy changes. Aside from the leadership changes, there has been a flurry of executive orders from the president. Most notable for the industry is the executive order placing a blanket 60-day freeze on agency regulatory actions. Other developments include:
- Crypto. In addition to the executive order to create a working group to review regulation of the crypto asset sector, acting Securities and Exchange Commission (SEC) Chair Mark Uyeda announced the formation of a crypto task force to develop a regulatory framework. SEC staff also issued Staff Accounting Bulletin (SAB) 122 to rescind SAB 121 on crypto safeguarding obligation.
- Climate. Regarding the SEC final rule on climate, which is in litigation, the acting SEC chair noted the SEC is deliberating next steps and directed the staff to request the court not schedule the litigation for argument. An executive order was issued to rescind the prior administration’s order to direct leadership of financial regulators to develop a strategy to measure climate-related risks.
- PCAOB. As we reported last month, the SEC extended the comment periods for two Public Company Accounting Oversight Board (PCAOB) final rules – “Firm Reporting” and “Firm and Engagement Metrics and Related Amendments to PCAOB Standards” – until Feb. 4, 2025. On Feb. 11, 2025, the PCAOB withdrew both proposed rules.
In case you missed it, we issued our “Annual SEC and PCAOB Update for Public Companies,” on Jan. 31, 2025. In addition to updates from the SEC and PCAOB, we cover the 2024 American Institute of CPAs & Chartered Institute of Management Accountants Conference on Current SEC and PCAOB Developments, recap developments from the Center for Audit Quality, and provide an appendix of key dates for select SEC rulemaking.
We wish you well during this financial reporting season and look forward to keeping you informed.
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From the federal financial institution regulators
Leadership changes at agencies announced
Several leadership changes took place throughout the federal banking regulatory agencies following the presidential election. Notable changes, as well as announcements on realigned or suspended agency agendas, follow:
- Office of the Comptroller of the Currency (OCC): Rodney Hood was announced as acting comptroller of the currency on Feb. 7, 2025, by the U.S. Department of the Treasury. Jonathan Gould was nominated to be comptroller of the currency on Feb. 12, 2025. Gould was previously senior deputy comptroller and chief counsel of the OCC from 2018 to 2021. His nomination is subject to Senate confirmation.
- Federal Deposit Insurance Corp. (FDIC): Travis Hill was named acting chair on Jan. 20, 2025, replacing Martin Gruenberg. Following his appointment, Hill issued a statement outlining the agency’s anticipated areas of focus in the months ahead. On Feb. 10, 2025, Jonathan McKernan announced he would be leaving the FDIC board with the appointment of Rodney Hood at OCC, as the FDIC board would exceed the number of Republicans permitted by law.
- National Credit Union Administration (NCUA): President Donald Trump appointed Kyle Hauptman as NCUA chair on Jan. 20, 2025. Hauptman, who previously served as vice chair of the agency, issued a statement on the agency’s priorities.
- Consumer Financial Protection Bureau (CFPB): Trump nominated Jonathan McKernan as director of the CFPB on Feb. 12, 2025. McKernan has served as a member of the FDIC board of directors since January 2023. His nomination is subject to Senate confirmation. Earlier in the month, Trump appointed Office of Management and Budget Director Russell Vought to serve as acting director in the interim. Following his appointment, reports say that Vought sent an agencywide email calling for a halt on new proposed or final rules, agency guidance, investigative activities and enforcement actions, and a suspension on the effective dates of any final rules yet to take effect. Bureau staff was also instructed to cease all supervision and examination activities until further notice.
FDIC issues documents on supervision of crypto-related activities
On Feb. 5, 2025, the FDIC released 175 documents related to the agency’s past supervision of crypto-related activities. This release comes in connection with an ongoing review of the agency’s supervisory communications with banks on crypto-related activities initiated by acting Chair Travis Hill. The release comprises agency correspondence with banks interested in engaging in crypto- and blockchain-related activities, including additional correspondence related to previously issued “pause” letters.
In an accompanying statement, Hill stated that the documents illustrated repeated FDIC resistance to banks’ interest in engaging in crypto- and blockchain-related activity. Hill commented that the agency is “actively reevaluating” its supervisory approach in this area, including “replacing Financial Institution Letter (FIL) 16-2022 and providing a pathway for institutions to engage in crypto- and blockchain-related activities while still adhering to safety and soundness principles.”
Agencies schedule second public meeting on regulatory review
On Jan. 31, 2025, the Federal Reserve Board (Fed), the OCC, and the FDIC announced a second public outreach meeting to be held on March 6, 2025. Preselected stakeholders will provide comments on regulations in the following categories: applications and reporting; powers and activities; international operations; consumer protection; directors, offices, and employees; and money laundering. Submission of comments closed on Feb. 14, 2025. The meeting will be available for public viewing.
Other activities affecting financial services policy
White House issues executive orders and recissions
More than 50 executive orders (EO) marked the first few weeks of the Trump administration. Trump also revoked a slate of executive orders and presidential memorandums issued under the Joe Biden administration. Following is a selection of activity likely to be of interest to readers.
Artificial intelligence
As one of many repeals included in EO 14148, Trump rescinded Biden EO 14110, “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence.” Issued in October 2023, this EO directed Treasury to undertake a broad initiative to research and promote safe and secure development of AI and responsible innovation. The now-rescinded EO resulted in the issuance of a Treasury request for information in June 2024 and a December 2024 report on the uses and risks of AI in financial services.
Trump subsequently signed EO 14179, “Removing Barriers to American Leadership in Artificial Intelligence,” suspending policies and agency actions taken pursuant to Biden EO 14110, pending further review by Trump-appointed AI leadership and staff.
Climate-related financial risk
EO 14148 also included the recission of Biden EO 14030, “Climate-Related Financial Risk.” Signed in May 2021, the climate-related EO had previously directed leadership to develop a comprehensive strategy to measure climate-related risks to federal government programs and operations and to provide an assessment of the financing needed to achieve net-zero greenhouse gas emissions for the U.S. economy by 2050.
Both the FDIC and the Fed announced their withdrawals from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). Each agency issued a press release stating that the work of the NGFS did not fall within the agency’s authorities and mandate.
Crypto assets
Referencing promotion of “digital assets, blockchain technology, and related technologies,” EO 14178, “Strengthening American Leadership in Digital Financial Technology,” creates a working group to review regulation of the crypto asset sector. The EO develops a federal regulatory framework governing digital assets, including stablecoins, and prohibits the establishment of central bank digital currencies within the U.S.
Regulatory freeze
Trump issued a presidential memorandum placing a blanket 60-day freeze on agency regulatory actions, which historically is common practice when the administration changes from one party to the other. The regulatory freeze requires executive departments and agencies to stop issuing new proposals and final rules, and to withdraw any rules finalized but not yet published in the Federal Register.
From the Financial Accounting Standards Board (FASB)
FASB proposes codification improvements
The FASB on Jan. 22, 2025, issued a proposed Accounting Standards Update (ASU), “Codification Improvements,” detailing targeted and incremental improvements for a wide range of topics in the FASB Accounting Standards Codification. The proposed improvements, which are not expected to have a significant effect on current accounting practice, target technical corrections, unintended application of guidance, clarifications, and updated references and illustrative examples, among other improvements.
The proposed ASU would address 34 issues, including:
- Removing the term “amortized cost” from the Master Glossary
- Clarifying the calculation of earnings per share when a loss from continuing operations exists
- Clarifying calculation of the reference amount for beneficial interests
- Clarifying methods to account for treasury stock retirements
Comments are due April 22, 2025.
From the Securities and Exchange Commission (SEC)
SEC acting chair announced, crypto task force launched
On Jan. 21, 2025, the SEC announced that Mark Uyeda was appointed acting chair of the SEC, to begin serving following the departure of Gary Gensler. Following this appointment, Uyeda named selections to serve in senior staff, executive staff, and other leadership positions in an acting capacity across the agency.
Uyeda also announced the formation of a crypto task force led by Commissioner Hester Peirce, with the aim of “developing a comprehensive and clear regulatory framework for crypto assets.” Peirce released a statement on the task force’s commitment to promoting innovation, creating a consistent regulatory framework within the SEC’s statutory authority, and providing the industry with greater regulatory clarity, while achieving the agency’s key mission of investor protection. Peirce outlined many of the task force’s objectives and areas of consideration, including clarifying the status of crypto assets under securities laws and the SEC’s scope of jurisdiction, potentially providing prospective and retroactive regulatory relief for certain coin and token offerings, and assessing paths to registration for token offerings.
Members of the public are invited to engage with the task force via written submission or meeting request.
Acting chair offers statement on climate
On Feb. 11, 2025, Uyeda announced the SEC is deliberating the appropriate next steps for the ongoing litigation on its climate-related disclosure rules. He directed the staff to request the court not schedule the litigation for argument until the SEC forms its current positions.
SEC rescinds SAB 121 on crypto safeguarding obligation
On Jan. 23, 2025, the SEC issued Staff Accounting Bulletin (SAB) No. 122. This document rescinds the previously issued SAB No. 121, which required an entity to record a liability when it had an obligation to safeguard third-party crypto assets.
For a summary of the recission and its effects, refer to the Crowe article “SEC Rescinds SAB 121 on Crypto Safeguarding Obligation.”
CorpFin rescinds Staff Legal Bulletin 14L
On Feb. 12, 2025, the Division of Corporation Finance (CorpFin) published Staff Legal Bulletin (SLB) 14M, rescinding SLB 14L and providing updated clarifications on the staff’s views on shareholder proposal exclusions and other related matters.
Previously, SLB 14L had limited a company’s ability to exclude shareholder proposals on the basis of the “economic relevance” exclusion under Rule 14a-8(i)(5) or the “ordinary business” exclusion under Rule 14a-8(i)(7). In particular, the now-rescinded SLB provided exceptions that generally prevented companies from invoking these exclusions for shareholder proposals raising issues with broad social or ethical impact. New SLB 14M reverts to a company-specific analysis and is generally expected to provide companies with greater latitude in excluding proposals based on their lack of economic relevance or relation to ordinary business operations.
SEC extends Form PF compliance date
The SEC and the Commodities Futures Trading Commission (CFTC) extended the compliance date of jointly issued final amendments to Form PF from March 12, 2025, to June 12, 2025. The final amendments imposed enhanced reporting and disclosure requirements on certain SEC-registered investment advisers to private funds, including:
- Enhanced reporting for large hedge fund advisers on qualifying hedge funds with a net asset value of at least $500 million, including enhanced information on risk and exposure, investment performance by strategy, and financing and investor liquidity
- Enhanced reporting for advisers and their private funds, including enhanced information on assets under management and asset value, withdrawal and redemption rights, inflows and outflows, borrowings and types of creditors, beneficial ownership, and fund performance
- Separate reporting for “each component fund of a master-feeder arrangement and parallel fund structure” and aggregate reporting for trading vehicles used by reporting funds
In addition, the amendments remove the aggregate reporting requirement on hedge funds by large hedge fund advisers.
SEC publishes annual NRSRO report
On Jan. 28, 2025, the SEC’s Office of Credit Ratings published its annual report on Nationally Recognized Statistical Rating Organizations (NRSRO). The report provides an overview of 2024 NRSRO examinations and an analysis of examination results and participant discussions on credit rating activity and industry developments.
SEC updates CorpFin C&DIs
On Jan. 27, 2025, CorpFin published new updates to the Compliance and Disclosure Interpretations (C&DIs) on proxy rules and Schedules 14A/14C. The new C&DIs relate primarily to persons submitting or acting under a Notice of Exempt Solicitation.
On Feb. 11, 2025, CorpFin issued updated C&DIs on beneficial ownership reporting.
SEC issues exemptive relief
On Feb. 7, 2025, the SEC provided temporary relief from Exchange Act Rule 13f-2 and reporting on Form SHO. Rather than an initial Form SHO due on Feb. 14, 2025, the new initial reporting date is Feb. 17, 2026, for the January 2026 reporting period.
On Feb. 10, 2025, the SEC exempted reporting of certain personally identifiable information to the Consolidated Audit Trail (CAT) for U.S. natural persons who trade in the stock market. The exemption mitigates certain security risks and is not required to achieve the purpose of the CAT.
From the Public Company Accounting Oversight Board (PCAOB)
PCAOB withdraws proposed firm and engagement metrics and firm reporting requirements
On Feb. 11, 2025, the PCAOB withdrew its proposed rules on firm and engagement metrics and firm reporting that were originally adopted by the PCAOB, subject to SEC approval, on Nov. 21, 2024.
PCAOB publishes report on using the work of specialists
On Feb. 4, 2025, the PCAOB published “Spotlight: Considerations for Audit Firms Using the Work of Specialists,” highlighting observations “designed to help audit firms ensure appropriate procedures are performed when using the work of a specialist.” To address this, the report covers the following topics:
- Evaluating the work of a company specialist
- Using the work of an auditor-employed specialist
- Using the work of an auditor-engaged specialist
- Common deficiencies related to use of specialists
- Reminders for audit firms
- Good practices
- Questions for audit committees
The audit committees section provides questions that audit committees might want to consider, in order to gain an understanding of their audit firm’s work related to the use of specialists.
PCAOB releases video on firm risk assessment processes under new quality control standard
The PCAOB on Jan. 30, 2025, released a staff presentation intended to help firms and auditors understand the risk assessment process under the PCAOB’s new quality control standard, QC 1000, “A Firm’s System of Quality Control.”
Topics include:
- Establishing quality objectives
- Identifying and assessing quality risks
- Designing and implementing quality responses that address quality risks
- Modifying the risk assessment
PCAOB publishes report on journal entries
On Jan. 16, 2025, the PCAOB released a new staff publication, “Audit Focus: Journal Entries,” to address common deficiencies related to the auditor’s examination of journal entries. It provides key reminders for auditors related to testing of journal entries, identification of the most common types of journal entry testing deficiencies, and examples of good practices.
From the American Institute of Certified Public Accountants (AICPA)
AICPA FinREC releases draft single-segment disclosures for broker-dealers
On Jan. 21, 2025, the AICPA Financial Reporting Executive Committee (FinREC) provided for public comment an exposure draft detailing draft segment disclosures for a broker-dealer with a single reportable segment to comply with the new segment disclosures required by ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The draft disclosures as well as additional segment guidance, as described in the exposure draft, will ultimately be included in the AICPA’s “Brokers and Dealers in Securities – Accounting Guide.”
Comments are due March 24, 2025.
See more details in the Crowe article “AICPA FinREC Releases Draft Single-Segment Disclosures.”
FASB materials reprinted with permission. Copyright 2025 by Financial Accounting Foundation, Norwalk, Connecticut. Copyright 1974-1980 by American Institute of Certified Public Accountants.
Portions of AICPA materials reprinted with permission. Copyright 2025 by AICPA.
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Read about OCC, FDIC removing reputation risk from exams; regulators on rescinding 2023 CRA rule; SEC ending climate disclosure rule defense; and more
Read about FDIC & NCUA Q4 industry data; FDIC board actions including on brokered deposits, change in control, and corporate governance; and more.
Read about agency leadership changes; Trump EOs; SEC acting chair crypto task force, statement on climate; and PCAOB withdrawal of proposed rules.
Read about OCC, FDIC removing reputation risk from exams; regulators on rescinding 2023 CRA rule; SEC ending climate disclosure rule defense; and more
Read about FDIC & NCUA Q4 industry data; FDIC board actions including on brokered deposits, change in control, and corporate governance; and more.
Read about agency leadership changes; Trump EOs; SEC acting chair crypto task force, statement on climate; and PCAOB withdrawal of proposed rules.