Responding to SEC Comments - YouTube

I’m attorney Laura Anthony founding partner of Legal & Compliance, a full service corporate

securities and business transactions law firm.

Today is the first LawCast in a series on SEC comments and responses.

The SEC Division of Corporate Finance, referred to as CorpFin in the industry reviews and

comments upon filings made under the Securitiy Exchange Act of 1934 and the Securities Act

of 1933.

The purpose of a review by CorpFin is to ensure compliance with the disclosure requirements

under the federal securities laws, including Regulation S-K and Regulation S-X, and to

assist in enhancing such disclosures as to each particular company.

CorpFin’s primary objective really is to improve disclosure which is thought to be

the foundation of protecting investors.

CorpFin also monitors for violations of the anti-fraud provisions of the federal securities

laws and may refer a matter to the Division of Enforcement where they have material concerns

over the adequacy or accuracy of reported information or other potential securities

law violations.

CorpFin selectively reviews filings, although generally all first-time filings, such as

an S-1 for an initial public offering or Form 10 registration statement under the Exchange

Act, are fully reviewed.

Also, almost always fully reviewed are forms 8-K reporting a change of auditor, a material

acquisition, or a change in financial statements.

The Sarbanes-Oxley Act of 2002 requires that CorpFin review all public companies at least

once every three years.

Although the Sarbanes-Oxley Act specifies certain factors that the SEC should consider

when scheduling reviews, such as market capitalization, financial restatements, volatility of the

company’s stock price and the price/earnings ratio, CorpFin does not publicly disclose

the criteria it uses to identify companies and filings for review.

For a publicly reporting company, it is important to remember that your filings may be reviewed

at any time and periodic comment letters are a standard part of being public.

There are three basic levels of review: 1) a full review in which a filing will be reviewed

from cover to cover, including both legal and accounting aspects and format for compliance

with the federal securities laws; 2) a partial review which may include either legal or accounting,

but generally a partial review is related to financial statements and related disclosures,

such as MD&A; or 3) a targeted review in which CorpFin will examine the filing for one or

more specific items of disclosure.

Although not a designated level of review, CorpFin sometimes monitors a filing, which

is the term the use for a light review.

Reviewers are appointed files based on industry sectors.

CorpFin has broken down its reviewers into eleven broad industry sectors: healthcare

and insurance; consumer products; information technologies and services; natural resources;

transportation and leisure; manufacturing and construction; financial services; real

estate and commodities; beverages, apparel and mining; electronics and machinery and

telecommunications.

Each industry office is staffed with an assistant director and approximately 25 to 35 professionals,

primarily accountants and lawyers.

Each filing has more than one reviewer with a frontline contact person and supervisor.

A full review file will have an accounting and legal reviewer as well as a supervisor.

Neither the SEC nor the CorpFin evaluates the merits of any transaction or makes an

assessment or determination as to whether a particular transaction or company is appropriate

for any particular investor or the marketplace as a whole.

The purpose of a review is, and I say it again, to ensure compliance with the disclosure requirements

of the federal securities laws.

CorpFin may ask for increased risk factors and clear disclosure related to the merits

or lack thereof of a particular transaction, but they do not assess or comment on the merits

beyond the disclosure.

I’m securities attorney Laura Anthony, founding partner of Legal & Compliance, and producer

of LawCast.

Should you want to know more about the topic we cover, please visit LawCast.com and Securitieslawblog.com.

Also feel free to contact me directly.

Inquiries of a technical nature are always encouraged.