Division of Corporation Finance
Filing Review Process
The Division of Corporation Finance selectively reviews filings made under the Securities Act of 1933 and the Securities Exchange Act of 1934 to monitor and enhance compliance with the applicable disclosure and accounting requirements. In its filing reviews, the Division concentrates its resources on critical disclosures that appear to conflict with Commission rules or the applicable accounting standards and on disclosure that appears to be materially deficient in explanation or clarity.
The Division does not evaluate the merits of any transaction or determine whether an investment is appropriate for any investor. The Division’s review process is not a guarantee that the disclosure is complete and accurate — responsibility for complete and accurate disclosure lies with the company and others involved in the preparation of a company’s filings.
The Division performs its primary review responsibilities through 11 offices staffed with approximately 80 percent of the Division’s employees. The members of these 11 offices have specialized industry, accounting, and disclosure expertise. The Division assigns filings by companies in a particular industry to one of the 11 Assistant Director Offices listed below. Generally, the Division has staffed the offices with 25 to 35 professionals, primarily accountants and lawyers. We show each company’s office assignment in EDGAR following the basic company information that precedes the company’s filing history.
An Associate Director oversees each Assistant Director Office. The Deputy Director and the Director oversee the entire filing review process.
Required and Selective Review
As required by the Sarbanes-Oxley Act of 2002, 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. To preserve the integrity of the selective review process, the Division does not publicly disclose the criteria it uses to identify companies and filings for review.
Scope of Reviews
If the Division selects a company or a filing for review, the extent of that review will depend on many factors, including the criteria set forth in Section 408 of the Sarbanes-Oxley Act and the factors identified through our selective review criteria. The scope of a review may be:
Much of the Division’s review involves evaluating the disclosure from a potential investor’s perspective and asking questions that an investor might ask when reading the document. When the staff identifies instances where it believes a company can improve its disclosure or enhance its compliance with the applicable disclosure requirements, it provides the company with comments. The range of possible comments is broad and depends on the issues that arise in a particular filing review. The staff completes many filing reviews without issuing any comments.
In addition to a first level examiner, in nearly all cases a second person reviews a filing and proposed comments to help achieve consistency in comments across filing reviews. We refer to this person as the reviewer.
The Division views the comment process as a dialogue with a company about its disclosure. The staff’s comments are based on a company’s disclosure and other public information and reflect its understanding of that company’s facts and circumstances. In comments, 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.
Company Response to Comments
A company generally responds to each comment in a letter to the staff and, if appropriate, by amending its filings. A company’s explanation or analysis of an issue will often resolve a comment. Depending on the nature of the issue, the staff’s concern, and the company’s response, the staff may issue additional comments following its review of the company’s response to its prior comments. This comment and response process continues until the staff and the company resolve the comments.
Depending on the nature of a pending issue, the Division’s Office of Chief Accountant may decide to involve the Commission’s Office of the Chief Accountant during the comment and response process on matters relating to accounting and financial disclosure matters.
Closing a Filing Review
When a company has resolved all Division comments on a Securities Act registration statement, the company may request that the Commission declare the registration statement effective so that it can proceed with the transaction. When taking that action, the Division, through authority delegated from the Commission, gives public notice on the SEC’s EDGAR system that the registration statement is effective.
When a company has resolved all Division comments on an Exchange Act registration statement, a periodic or current report, or a preliminary proxy statement, the Division provides the company with a letter to confirm that its review of the filing is complete.
To increase the transparency of the review process, when the Division completes a filing review it makes its comment letters and company responses to those comment letters public on the SEC’s EDGAR system. The Division makes this correspondence public no earlier than 20 business days after it has completed its review of a periodic or current report or declared a registration statement effective. In making correspondence publicly available on the EDGAR system, the Division redacts any information subject to a Rule 83 confidential treatment request without evaluating the substance of that request. Only if and when a request is made for that information under the Freedom of Information Act does the Division undertake any substantive review of the confidential treatment request.
Division staff members, at all levels, are available to discuss disclosure and financial statement presentation matters with a company and its legal, accounting, and other advisors. A company should not hesitate to request that the staff reconsider a comment it has issued or reconsider a staff member’s view of the company’s response to a comment at any point in the filing review process. Because of the diversity of issues that may be raised in the filing review and comment process, the Division does not require companies and their representatives to follow a formal protocol in consulting with its staff or in seeking reconsideration of a staff comment. However, the following information may be helpful to companies when doing so.
If a company does not understand a comment or the staff’s purpose in issuing a comment, it should seek clarification from the examiner before it responds. If the company does not understand the comment after discussing it with the examiner, it may wish to speak to the reviewer who approved the comment before the Division issued it. To make it easier for a company to identify the appropriate people to contact about a filing review, the Division includes the names and phone numbers of the staff members involved in that review in each of its comment letters.
In any instance where the staff suggests that a company should revise its disclosure or its financial statements, the company may, and should as appropriate, provide the staff with a written explanation of why it provided the disclosure it did. In many cases, this response will resolve the comment. If the staff indicates that it intends to reissue the comment, the company may wish to pursue reconsideration of the comment or its response before the staff does so. In this case, the company should, after discussing the matter with the examiner, ask to speak to the reviewer of that comment letter.
If a company wishes to seek more senior level reconsideration of a matter during the filing review process, it should feel free to do so as indicated below. A request for reconsideration may be oral or written.
Legal and Textual Disclosure Matters
If a company wishes to seek reconsideration of a staff comment relating to a legal issue or a textual disclosure matter, the normal course of the reconsideration process would begin with the Legal Branch Chief in the Assistant Director Office and then proceed to the Assistant Director. After discussing the matter with the Assistant Director, the company may address the matter with the Associate Director who oversees that office. A company may direct further reconsideration requests to the Deputy Director or to the Director.
Set forth below are the Legal Branch Chiefs and Assistant Directors of each Assistant Director Office as well as the Associate Directors responsible for overseeing each office.
|Branch Chief||Senior Assistant Chief Accountant|
Kevin W. Vaughn
In addition, the company or its representatives should feel free to involve the Commission’s Office of the Chief Accountant (distinct from the Division’s Office of Chief Accountant) at any stage in this process. Generally, the Commission’s Office of the Chief Accountant addresses questions concerning the application of generally accepted accounting principles while the Division resolves matters concerning the age, form, and content of financial statements required to be included in a filing. Procedures for consulting with the Commission’s Office of the Chief Accountant are set forth at http://www.sec.gov/info/accountants/ocasubguidance.htm.
January 19, 2017