SEC Comment Letters
Overview: The Division of Corporation Finance of the Securities and Exchange Commission routinely reviews documents that publicly-held companies are required to file with the SEC. As stated by the SEC, the Division undertakes some level of review of each reporting company at least once every three years and reviews a significant number of companies more frequently. In addition, the Division selectively reviews transactional filings – documents companies file when they engage in public offerings, business combination transactions, and proxy solicitations. Through the Division's review process, the Staff checks to see if publicly-held companies are meeting their disclosure requirements and seek to improve the quality of disclosures.
If the Division selects a filing for review, the extent of that review will depend on many factors, including the results of a preliminary review. The level of further review may be:
- a full cover-to-cover review in which the Staff will examine the entire filing for compliance with the applicable requirements of the federal securities laws and regulations;
- a financial statement review in which the Staff will examine the financial statements and related disclosures for compliance with applicable accounting standards and the disclosure requirements of the federal securities laws and regulations, or ;
- a targeted-issue review in which the Staff will examine the filing for one or more specific items of disclosure for compliance with applicable accounting standards and/or disclosure requirements of the federal securities laws and regulations.
The Division’s comments are in response to a company’s disclosure and other public information and are based on the Staff’s understanding of that company’s facts and circumstances. In issuing comments to a company, the Staff may request that a company provide additional supplemental information so the Staff can better understand the company’s disclosure, revise disclosure in a document on file with the SEC, provide additional disclosure in a document on file with the SEC, or provide additional or different disclosure in a future filing with the SEC.
Services: In responding to the comment letters, the Division has presented what it believes to be best practices for filers as follows:
- Understand the comment and discuss questions with the Staff before responding
- Prepare a thorough response
- Key the response to the comment (stay focused)
- Quote the authority for the accounting in detail
- Indicate planned revisions
Our services are aligned with these best practices. We have extensive experience responding to SEC accounting and reporting comment letters and, therefore, we are able to effectively manage the process including dealing directly with the Staff on our client’s behalf.
Case Study: In one instance, we were brought in by a company that had exchanged six rounds of comments with the SEC related to their accounting for a PIPE Transaction, and had filed two amendments, all over an eight month period. The company had not directly communicated with the SEC. The company’s accounting was wrong. After consulting on the propriety of accounting with the company, we initiated a conference call with the Staff where we requested and were granted an opportunity to share a draft corrected filing with the Staff without filing another amendment. The draft and one final response letter was provided to the Staff and a conference call was held to discuss the final details of the Staff’s recommendations. The final letter and report was filed and cleared by the Staff in three weeks. In addition to consulting on the appropriate accounting, we facilitated the communication between the company and the Staff, which resulted in closure of what the CEO called a “nightmare”.