SEC comment letters

As a public company, an SEC registrant's financial reporting and disclosure practices are subject to review by the SEC staff in connection with the Division of Corporation Finance's filing review process.  An existing SEC registrant's filings are, by law, subject to review at least once every three years. 

First time registrants, including companies undertaking initial public offerings, as well as registrants with transactional filings for business combinations, other securities offerings, and proxy solicitations, are subject to reviews that need to be cleared before initiating the transaction. 

Effectively resolving questions raised during the filing review process is often critical to ensuring access to the public capital markets, executing M&A and other capital markets transactions, and successfully supporting financial reporting and disclosure practices. 

By drawing on PwC's experience with public company accounting and financial reporting, and extensive experience with the SEC review process, companies are better positioned to develop financial reporting and disclosure practices that withstand regulatory scrutiny, anticipate potential areas of SEC focus in future filings, and meet constantly evolving expectations for clear and transparent financial reporting.

When planning and executing capital markets transactions and meeting ongoing reporting obligations in times of significant marketplace volatility and uncertainty, it is increasingly important to minimize delays and surprises. Last minute surprises, including those resulting from the need to revisit accounting policies and disclosures, and processing potential amendments to filings in response to SEC comments, take up valuable time and potentially jeopardize reporting timelines.

Chad Kokenge, Partner

Impacts to companies:

  • Effectively managing the filing review process and dealing with the SEC staff when resolving comments on financial accounting and reporting matters are critical to successfully execute capital markets transactions and meeting ongoing reporting requirements.
  • A high number of SEC staff comments as well as comments in difficult or complex areas of accounting may require a significant amount of time and effort to resolve, and potentially impact ongoing reporting processes and timelines for capital markets transaction.
  • SEC comments often illuminate disclosures that may conflict with rules or the applicable accounting standards or disclosures that may be deficient, underscoring the need to carefully develop and contemporaneously document key accounting and reporting matters.
  • SEC comment letters are publicly available, meaning issues raised in the review process will be available to investors, competitors and other stakeholders.

What companies should do:

  • Stay abreast of current areas of SEC focus, both for the company's industry and in general, so that management is better equipped to develop appropriate disclosures in new and emerging areas.
  • Carefully manage interactions with the SEC staff, to ensure that the company has the credibility and confidence in the process to appropriately address questions about ongoing accounting and financial reporting.
  • Review publicly available SEC comment letter for other registrants in the company's peer group which may reveal key themes and hot topics that require focus in connection with the Company's ongoing reporting.
  • Use knowledge of the SEC staff's current areas of focus to anticipate issues and ensure that the company develops contemporaneous documentation and disclosure that meets expectations for public company reporting.
  • Include time for responding to SEC staff comments, interacting with the SEC staff, and resolving follow-up questions into project plans and timelines.

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