Question 1

What is an SEC comment letter, and who issues it?

Accepted Answer

An SEC comment letter is written correspondence from the staff of the SEC's Division of Corporation Finance, issued in the course of a filing review, that asks a company to explain, revise, or supplement disclosure in a filing made under the Securities Act of 1933 or the Securities Exchange Act of 1934. The Division states that it reviews filings to monitor and enhance compliance with the applicable disclosure and accounting requirements, and that the range of possible comments is broad and depends on the issues that arise in a particular filing review. The Division completes many filing reviews without issuing any comments.

Question 2

Does the SEC review every registration statement and filing?

Accepted Answer

No. The Division of Corporation Finance selectively reviews filings made under the Securities Act of 1933 and the Securities Exchange Act of 1934; it does not publicly disclose the criteria it uses to select companies and filings for review, and the extent of any review depends on many factors, including the criteria set forth in Section 408 of the Sarbanes-Oxley Act. In its filing reviews, the Division concentrates its resources on critical disclosures that appear to conflict with Commission rules or applicable accounting standards and on disclosure that appears to be materially deficient in explanation or clarity. The scope of a review may be a full cover-to-cover review of the entire filing, a financial statement review covering the financial statements and related disclosure such as MD&A, or a targeted issue review of one or more specific items of disclosure. The Division does not evaluate the merits of any transaction or determine whether an investment is appropriate for any investor.

Question 3

What do SEC comment letters address?

Accepted Answer

Comment letters address compliance with the applicable disclosure and accounting requirements of the federal securities laws — the staff may issue comments where it believes a company can significantly enhance its compliance, concentrating on disclosure that appears to conflict with Commission rules or applicable accounting standards and disclosure that appears materially deficient in explanation or clarity. Through the comment process, the staff may request that a company provide supplemental information to help the staff 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. SEC Press Release 2004-89 notes that the letters set forth staff positions on the particular filing under review and do not constitute an official expression of the Commission's views.

Question 4

How does a company respond to an SEC comment letter?

Accepted Answer

A company generally responds to each comment in a letter to the staff and, if appropriate, amends its filing — for a Form S-1, by filing a pre-effective amendment (Form S-1/A). The staff may issue additional comments following its review of the company's response and any related amendments, and the process continues until all comments are resolved. Company response letters are submitted on EDGAR under the type CORRESP, either as stand-alone submissions or attached to a filing (SEC EDGAR how-do-i guide, "Submit a Correspondence (CORRESP)"). Filing and amendment procedures for Securities Act registration statements are governed by Regulation C (17 CFR 230.400 through 230.494); on EDGAR, amendments carry the "/A" suffix.

Question 5

Does resolving SEC comments mean the SEC approved the filing?

Accepted Answer

No. Under Section 23 of the Securities Act of 1933 (15 U.S.C. 77w), neither the fact that a registration statement has been filed or is in effect, nor the fact that no stop order is in effect, is a finding by the Commission that the registration statement is true and accurate on its face or that the Commission has passed upon the merits of, or given approval to, the security — and it is unlawful to represent otherwise to any prospective purchaser. The staff's filing review and the resolution of comments therefore do not constitute approval of the disclosure or the securities. The Division of Corporation Finance states that its review process is not a guarantee that the disclosure is complete and accurate, and that responsibility for complete and accurate disclosure lies with the company and others involved in the preparation of its filings (Division of Corporation Finance, The Filing Review Process).

Question 6

What happens after all comments on a registration statement are resolved?

Accepted Answer

When a company has resolved all of the Division's comments on a Securities Act registration statement, it may request that the Commission declare the registration statement effective. A request to accelerate the effective date is made under Rule 461 (17 CFR 230.461) by the registrant and the managing underwriters (or, if there are no managing underwriters, the principal underwriters). Under Section 8(a) of the Securities Act, a registration statement otherwise becomes effective on the twentieth day after filing unless the Commission accelerates or delays effectiveness, and Section 5 prohibits sales of the registered securities until the registration statement is in effect. For an Exchange Act registration statement, periodic or current report, or preliminary proxy statement, the Division instead provides the company a letter confirming that its review of the filing is complete (Division of Corporation Finance, The Filing Review Process).

Question 7

When do SEC comment letters and company responses become public?

Accepted Answer

The Division of Corporation Finance makes its comment letters and the company's response letters public on the SEC's EDGAR system no sooner than 20 business days after it has completed its review of a periodic or current report or declared a registration statement effective. The public-release policy covers comment and response letters relating to disclosure filings made after August 1, 2004 and reviewed by the Division of Corporation Finance or the Division of Investment Management (SEC Press Release 2005-72); the SEC states there are no plans to release letters for reviewed filings made before that date. On EDGAR, released staff letters appear as UPLOAD documents and filer response letters as CORRESP documents (SEC, "How to Search for EDGAR Correspondence").

Question 8

Since when has the SEC released comment letters publicly, and how did the timing change?

Accepted Answer

The staff of the SEC announced on June 24, 2004 (Press Release 2004-89) that it would publicly release comment letters and response letters relating to disclosure filings made after August 1, 2004 and reviewed by the Divisions of Corporation Finance and Investment Management, and it began releasing that correspondence through EDGAR on May 12, 2005 (Press Release 2005-72). Under the 2005 implementation, letters were released no earlier than 45 days after the review of the disclosure filing was complete; the staff described the policy as expanding the transparency of the comment process so that the information is available to a broader audience, free of charge. On December 1, 2011, the Division announced ("SEC Staff to Release Filing Review Correspondence Earlier") that, to further enhance the transparency of the filing review process, the staff would release filing review correspondence no earlier than 20 business days following the completion of a filing review, beginning January 1, 2012 — the timing that applies today.

Question 9

What happens to correspondence about confidential draft registration statements?

Accepted Answer

Correspondence about a nonpublic draft registration statement (DRS) is submitted on EDGAR under the submission type DRSLTR rather than CORRESP, and the staff publicly releases its comment letters and the issuer's responses on nonpublic draft submissions no earlier than 20 business days following the effective date of the registration statement. The EDGAR Filer Manual instructs that all correspondence with the staff during the confidential or nonpublic portion of the filing review process be submitted as Correspondence Related to Draft Registration Statement (DRSLTR) — not as a CORRESP submission — so that it remains nonpublic during the review (EDGAR Filer Manual, Volume II). An issuer conducting an IPO or an initial registration of a class of securities must publicly file its registration statement, the initial nonpublic draft, and all draft amendments at least 15 days before it conducts its road show or, if there is no road show, at least 15 days before the requested effective date, as stated in the Division of Corporation Finance's current draft registration statement conditions. An issuer seeking Rule 83 confidential treatment for a draft registration statement may make the request electronically using submission type DRSLTR.

Question 10

How can anyone find SEC comment letters and company responses?

Accepted Answer

Comment-letter correspondence is publicly available free of charge on the SEC's EDGAR system: in EDGAR full-text search, users can select the form type UPLOAD (SEC-originated letters to filers) or CORRESP (filer response letters) from the Advanced Search form-type menu, and can add a search term or phrase, a date range, a company name, a CIK number, or an SIC code. EDGAR full-text search covers the full text of filings submitted electronically since 2001 (SEC, EDGAR Full-Text Search), and released review correspondence exists only for disclosure filings made after August 1, 2004. Correspondence can also be found by browsing a company's chronological EDGAR filing history, and some company replies are made within amended filings rather than as stand-alone CORRESP submissions — these are designated by the term "[Cover]" in the document description.

Question 11

Can a company keep parts of its response to a comment letter confidential?

Accepted Answer

Yes, procedurally. SEC Rule 83 (17 CFR 200.83) provides the procedure by which a person submitting information to the Commission may request that it not be disclosed under the Freedom of Information Act, where no other statute or Commission rule provides a confidential-treatment procedure for that category of information. Under Rule 83, the submitter supplies the confidential portion segregated from information for which confidential treatment is not requested, marks each page "Confidential Treatment Requested by [name]" with an identifying number and code, and sends a copy of the written request to the SEC's Office of Freedom of Information and Privacy Act Operations. No determination on the request is made unless that office receives a request for disclosure of the records, and a confidential treatment request expires ten years from the date of receipt unless a renewal request is received before it expires.

Question 12

Does the SEC issue comment letters on periodic reports such as Form 10-K?

Accepted Answer

Yes. The review-and-comment process also applies to Exchange Act reports: Section 408 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7266) directs the Commission to review, on a regular and systematic basis, the disclosures — including the financial statements — of issuers reporting under Exchange Act Section 13(a) (including reports filed on Form 10-K) that have a class of securities listed on a national securities exchange or traded on an automated quotation facility of a national securities association. In no event may an issuer required to file reports under Section 13(a) or 15(d) be reviewed under that section less frequently than once every 3 years. For scheduling those reviews, Section 408(b) requires the Commission to consider, among other factors: issuers that have issued material restatements of financial results; issuers that experience significant volatility in their stock price as compared to other issuers; issuers with the largest market capitalization; emerging companies with disparities in price to earning ratios; issuers whose operations significantly affect any material sector of the economy; and any other factors the Commission considers relevant. The Division of Corporation Finance states that, as required by the Sarbanes-Oxley Act, it undertakes some level of review of each reporting company at least once every three years (Division of Corporation Finance, The Filing Review Process).

EDGAR type	What it is	Who submits it	When it becomes public
UPLOAD	SEC-originated letters to filers — the staff's comment letters on a filing under review · source	SEC staff (Division of Corporation Finance or Division of Investment Management)	Made public on EDGAR no sooner than 20 business days after the Division completes its review of a periodic or current report or declares a registration statement effective · source
CORRESP	Filer correspondence, including the company's response letters to staff comments · source	The filing company (or other filer)	Made public on EDGAR no sooner than 20 business days after the Division completes its review of a periodic or current report or declares a registration statement effective · source
DRS / DRS/A	Draft registration statement (and draft amendments) submitted for nonpublic staff review · source	The issuer	Nonpublic while under review; for an IPO or initial registration of a class of securities, the issuer must publicly file the registration statement, the initial draft, and all draft amendments at least 15 days before its road show (or, with no road show, at least 15 days before the effective date) · source
DRSLTR	Correspondence related to a draft registration statement — the Filer Manual instructs that all correspondence with the staff during the confidential or nonpublic portion of the filing review be submitted this way, not as CORRESP · source	The issuer	Staff comment letters and issuer responses on nonpublic draft submissions are released on EDGAR no earlier than 20 business days following the effective date of the registration statement · source

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