FacultyFaculty/Author Profile

Working Effectively with the SEC: Preparing Your Registration Statement


SCOTT BENNETT: OK. So thank you everybody. We're moving on to panel two. And the topic of panel two is working effectively with the SEC and preparing your registration statement. So joining me for panel two, on my far right, is Joe Kaufman. He's a Capital Markets partner at Simpson Thatcher.

And then next to me is Pam Long. And Pam is an assistant director in the Division of Corporate Finance at the SEC. So we're very lucky to have Pam up from D.C today, despite the bad weather. And Pam is going to give us a very helpful overview on how to work effectively with the SEC. And she knows where of she speaks, because she's at the SEC. And she can give very good guidance on how to make that a smooth process. Pam?

PAMELA A. LONG: Oh, OK. Well, I guess I'll start. I have to first give you my disclaimer as an SEC employee, which is to tell you that the views that I express today are my own, and they are not the views of the Commission or any member of its staff. So as Scott said, I'm an assistant director in the Division of Corporation Finance. I work in one of 11 offices in the division that engages in the disclosure review program. So we review registration statements under the Securities Act. We look at periodic reports on form 10-K, 10-Qs foreign issuer reports. We look at registration statements under the Exchange Act. And we also review requests for confidential treatment.

We have a staff-- each of these offices has a staff of both lawyers and accountants. We've got about 25-ish these days per office who are engaged in these processes. The offices-- each of the offices is industry specific. So for example, I'm in the manufacturing and construction office. So I have a bunch of companies that have SIC Codes that are in manufacturing industries or construction industries. And as those companies make public filings. My group is responsible for doing any review that we would do of any of their filings.

What I'm going to focus on today is the Securities Act registration statement process that we go through-- our review and comment process. I think that hopefully, I can give you some insight into how we work and that will help you to manage your processes a little more effectively, and a little more efficiently. Kind of, to know what's going on, once you've dropped your registration statement in with us. To have a sense of what our process is. So I'm going to cover a bunch of things here.

I'm going to start-- well, I'm going to talk about what happens between the time that you file a registration statement and the time that we actually start reviewing it. So there are some steps that we go through there. We need to make sure that the filing gets into the right hands. I'll talk about how we select filings for review. Some nonstarter sort of items that we look for right at the outset.

I want to talk about what you can kind of expect from us in terms of communication, and then a few things that we'll be looking for from you. I'll talk about the review and comment process itself, including what that's really intended to do, versus what it's really not intended to do. I'll talk about the types of comments that we issue and things that we look for. Things that we look at as we go through our reviews. And then I want to talk about what my approach, at least, to reviewing a registration statement is. And I can point out some of the things that I might be looking for as I go through that process.

I do also want to talk about requests for confidential treatment. There are, I guess, two types of requests for confidential treatment and about 3 and 1/2 different ways to make them, depending upon what the information is that you want to have treated confidentially. So I'll try to cover that, and getting your registration statement effective. And then if I'm lucky, at the end, and if I think of any additional tips to give you, I'll try to throw those out there as well.

But I want to first start, before I even get to any of that stuff, with our big news in Corp FIn this year, as it relates to registration statements. And tell me if you guys talked about this already in the first panel. But we expanded--

SCOTT BENNETT: We did briefly.

PAMELA A. LONG: --our policy. OK. So, draft registration statements-- the whole idea of them and of emerging growth companies was kind of a creature of the JOBS Act. And that for the first time, you know, we had a statutory provision that allowed companies who were emerging growth companies to submit a draft registration statement. Which we shorthand, DRS, so if you hear me say, DRS, that's what I mean. Submit a DRS ahead of actually filing a registration statement for confidential staff review. So that's been going on for a few years.

This past summer, we decided that, sort of in an effort to kind of facilitate more companies doing registered public offerings, we would expand that policy. So this is a staff policy, basically, where we've decided now that any company, regardless of whether you are an emerging growth company, can submit a draft registration statement for confidential staff review ahead of actually filing a registration statement.

Like the provision in the JOBS Act for the emerging growth companies, issuers who are going to rely on this policy have to file their public registration statement at least 15 days before they go on a road show. Or if they're not going to do a road show, 15 days before the filing is going to go effective. And they also have to publicly file, at that time, all of the draft registration statements, and amendments to those draft registration statements, that they have submitted previously.

AUDIENCE: Can I ask you a question? Sorry.


AUDIENCE: Are you thinking about doing this by rule making? I mean, the staff policy is one thing--


AUDIENCE: --formally incorporating--

PAMELA A. LONG: I think that, yeah, I take your question. The question is, are we thinking about doing this as a rule making, or are we just going to keep it as sort of an informal staff policy? As far as I know, at this time, this is just an informal staff policy. And I think that rule makings, I can tell you, can take kind of a while to get going and to get completed. And so, I think that on the staff, the thinking was that this is something we could do fairly quickly and easily and make this procedure available to more insurers, which will hopefully benefit people who are trying to do public offering. So as far as I know, at this point, it's a policy.

So when a company that wants to do an IPO, wants to submit a draft registration statement, we do ask that you provide us with a cover letter explaining that, that's what you're doing. And confirming that you will make the public filing of the registration statement at least 15 days prior to the road show or effectiveness. I'm going to, as I said, talk about confidential treatment again a little bit later on but let me just point out right now, that unlike the JOBS Act draft registration statements, we don't have any sort of statutory protection or legal confidential protection for these.

So what we're recommending that people do, if you want to assure that-- the staff is going to treat it confidentially just in our handling and processing of it no matter what. But in case we would get a FOIA request, or something of that nature, in while we have the draft registration statement under review, before the public filing is made, we recommend that people include a request for confidential treatment under Rule 83 in that same cover letter. And I'll circle back to that again when we get to the end. But I just want to throw that out there now to make sure you have it in your mind.

Since we've-- my understanding is that since we expanded this policy, we've had more than 20 companies who have submitted draft registration statements for IPOs that were not emerging growth companies. So they were following the new policy. We have also expanded the availability of the draft registration statement process to companies who are doing follow-on offerings as long as they are within one year of their IPO. Or within one year of the time that they may have filed or registered a class of securities under Section 12(b) of the Exchange Act.

These are a little bit different from the IPO draft registration statements because you only have 48 hours. You have to get your registration statement on file 48 hours before it goes effective, rather than 15 days. And you only get one bite at the apple, in the sense that, we'll look at your initial submission but if we have comments on that, and you need to revise your disclosures, those revised disclosures have to be provided in a publicly filed registration statement. So we won't go rounds of comments and amendments on a draft basis for a follow-on offering.

JOSEPH H. KAUFMAN: And the reason that one year period is important is because most IPO companies aren't eligible for short form registration on a S-3 for that first year. So if someone is doing a follow-on offering, you have to use the long form, which sort of left you out there hanging if you are filing publicly and waiting to hear whether the SEC was going to review or not. So now you have a process where you can sort of do that confidentially. Wait back and hear from the SEC whether they are going review. And if they aren't then you could sort of time up the going public with the filing. Sync it up with the marketing of the deal. Which is extremely helpful.

PAMELA A. LONG: And I think, I understand, we've had more than 40 of these since we adopted the new policy. And I know for myself and my own group, I've even had companies come back more than once. Do more than one follow-on offering during that first year. And they've done it initially on a confidential basis with a draft registration statement.

SCOTT BENNETT: And that may seem like a lot of follow-on offerings for a company that just did an IPO. Just for context-- it's very common in private equity sponsor backed companies where the sponsor-- their goal is to actually sell down their interest in this company. They were maybe looking at selling it in an M&A transaction but they like the public markets better. So they do an IPO of 15-ish%, but then they want to do a follow-on offering six months later at the IPO lock up. And then three months after that, they want to do another follow-on offering. And then maybe three months after that-- So it actually does come up a fair amount.

PAMELA A. LONG: Yeah. The other thing that we did in expanding this policy, was to make certain financial statement accommodations with regard to the draft registration statements. So at the time that a company submits a draft registration statement, it's OK to get financial information and information related to the financial information. So MD&A type information. If the company reasonably believes that, at the time that it's going to publicly file it's registration statement, that those financial statements won't need to be included at that time. Again, you know, with an effort toward trying to help companies not do unnecessary work. Not prepare financial statements that are not going to actually be required to be in the filed document. We're trying to give people a little bit of a break there.

So let me now jump in to what happens once you file a registration statement. Where does it go? Who gets it? What can you expect from us? As I mentioned, we're organized by industry groups. So there are 11 groups. Everybody has their list of SIC Codes. And I think this is helpful for companies in similar industries to continue to be reviewed by the same staff, because we get a little bit of experience with how those types of companies do business. The types of comments that we might issue. Things that we would look for. We get sort of a little bit of expertise going with the landscape of disclosure and the things that impact companies in particular industries.

And it's kind of nice for the companies too, because once you're a reporting issuer and you occasionally get your-- have an annual report review or further registration statement reviews, it's often the exact same staff that will come back. Not always, but it's often the same people. So you may get the chance to develop some relationships there.

Each of the AD groups has-- and when I say AD groups, that's again our shorthand. What I mean there is each of these industries specific groups. So each of these industries specific groups has some people who are assigned to monitor the incoming filings as they're made. Or submissions as they're made. And as those come in, people will put them through a screening process. And the purpose of the screening is to decide whether we think that we need to review the filing and go through that process, or whether the filing appears to be complete upon filing so that we can just make it effective without doing any further review.

The screening criteria that we apply-- there are some criteria, as well as, some just basic judgment. The criteria are confidential, so I can't really explain to you what those are. But as I heard in the last panel, we pretty much always review IPOs. And so let me just say, that I think that if you're submitting a registration statement for an IPO, or filing one, just build the time in.

Just assume that you're going to need some time before it actually goes effective. Because this is the first opportunity that we're getting to sort of see these public disclosures that a new company is making or a company that's new to the public disclosure arena, and it's nice to be able to engage in a back and forth and have some dialogue about the disclosure that's in there. So I think it's a good idea to just assume that there will be some comments for you.

Although I can't share the screening criteria, per se, I can tell you there is a couple of things that we look for at the outset and that if they are not present, we will not continue to process the filing. The first one of these is a delaying amendment. Now you may have covered in the earlier panel. Registration statements will go effective under the Section 8(a) of the Securities Act 20 days after they were filed. Or if they are amended within that time, 20 days after they're amended. Unless you have a delaying amendment on the facing page of the registration statement. And we always look for this.

It's important for a-- well, let me explain what it does first of all. It kind of constructively amends the registration statement from time to time so that it never really gets to that 20 days and never really goes effective by lapse of time. There's a particular language. It's set out in Rule 473 of Regulation C. And really, you just go find it, copy it, put it on the facing page your registration statement, and that takes care of it.

But it's important for a couple of reasons. One, is that it gives us time if we want to issue comments. It gives us time to get through that process with you. I think 20 days is a very short amount of time to expect to get through an entire review process with the staff. So it lets us be able to finish that up.

And then the other thing that does, is it lets you specify, or it lets the company specify, exactly what it wants the registration statement to go effective. So you don't have to sort of say, well I guess in 20 days we'll be effective. I mean, particularly when you have an underwritten offering, and you're pricing, it's very important to be able to manage exactly when effectiveness of that registration statement is going to take place. So having that delaying amendment on there will then let the company request acceleration of that 20 day period and go effective at a particular time. If the delay amendment is missing-- oh I'm sorry question?

AUDIENCE: I think you're going to come to the point.

PAMELA A. LONG: If it's missing? OK. If it's missing, we try to notice that right off the bat. Like very early on. And we will generally pick up the phone and call counsel right away to say, hey, you're delaying amendment is missing. And it's almost always the case that it's just an accident. It's just an oversight. It's a really easy fix. You don't have to amend the entire registration statement or refile the whole registration statement to fix this problem. You just send in-- it's basically a letter. You use a form type DELAM. And the letter just says we're amending such and such registration statement to include the following language.

There are a lot of examples of this. If you go to our public website and you look in the EDGAR filings there and you just search for DELAM, you can see how people have done it. And they're really all the same. It's a really quick and easy fix, I think, for companies. I had one the other day. This thing came in and we found it like immediately when it hit, basically. And somebody noticed right off the bat that there was no delaying amendment. So within minutes of the filing, we had counsel on the phone and I think they were just really surprised. Because normally it takes a little bit of time for us to get a filing, do the screening, get back, take our next steps on it. So I think this was kind of a surprise to them. But super quick there.

JOSEPH H. KAUFMAN: It happens. It happens. I will just say, some senior people, currently at the SEC division of Corporation of Finance, have filed without that language.


JOSEPH H. KAUFMAN: And on the receiving end of-- it's a miss.

PAMELA A. LONG: It's funny. I feel like it happens now more than it used to. I mean, I've been at the commission a long time now, and probably the first 10 or 15 years I was there, I maybe saw missing delaying amendments three times. And now, it's probably four or five or six times a year. I don't know why that is. But it's interesting. So we do see it.

SCOTT BENNETT: And just for context-- kind of why are we doing all this? The reason we're doing all this is because they wrote the 33 Act in 1933 before there was an SEC or a current practice on how the SEC reviews filings. And they wrote it in a way that doesn't exactly sync up with how it all functions today. And so there's just a workaround to statutory language written before any of what currently exists-- existed.

PAMELA A. LONG: Right. I wonder if registration statements were as long back then as they are today.

SCOTT BENNETT: They are much shorter. Well, I mean, we have old closing sets and things in-- our firm has been around forever. You can pull them from the 40s and the 50s and you know--


SCOTT BENNETT: --30 page IPO perspectives.


SCOTT BENNETT: It's amazing.

PAMELA A. LONG: Nice. So that's the first thing-- did I answer your question on the delaying amendment?

AUDIENCE: Well, I guess part of it was, if there is no delaying amendment, does the SEC think we're not going to review-- we won't have the time within that 20 day period, and so good luck, you become effective with whatever you have.

PAMELA A. LONG: Well, I think one of the concerns with there not being a delaying amendment is that the registration statement, if it's not complete, we don't have-- right, we don't have time to engage in that process. If it's not complete, or has misleading disclosures, or something like that, it is possible for the commission to issue a stop order. But that too takes time. So this is why we kind of want to get right on this, right off the bat. I've never had anybody put their foot down and say no, I'm not going to file a delaying amendment. I mean, it's a mistake, I think, when people omit that.

JOSEPH H. KAUFMAN: But, on a practical bases, if they did, you would start the stop order process and you would never have that ultimately--

PAMELA A. LONG: That's a possibility. Yeah. So that's one of the things that we look for at the outset. The other thing, is that the filing has to be materially complete when it comes in. Filing or submission has to be materially complete. And whether something is materially complete may depend a little bit on whether it's a filed registration statement or a draft registration statement. Because there are things that you are allowed to leave out of a draft registration statement but not a filed one.

So a filed one has to include a signed audit report, an auditor's consent, you have to have addressed all of the line items that the form requires, and you need to have all the financial statements that are supposed to be in the filing, as of the time that you make the filing. So if you've been in draft registrations-- the world of draft registration statements and you've omitted financial statements that would have needed to have been in there if you needed to include them, as of the time that you filed that or submitted that draft registration statement, now you have to put them in. So that needs to be in there.

There is an exception to this under the FAST Act that came out a couple of years ago. If you were an emerging growth company, you can omit from a filed registration statement, annual and interim information that relates to an historical period that you reasonably believe is not going to need to be included at the time of the offering. Provided that, at the time that you come up with your preliminary prospectus, and you want to distribute that, that you do include all of the financial information that's required at that time.

And also, there's no exception for interim information that will be part of a fiscal year, if you're going to need to include that fiscal year. So like, third quarter numbers-- we say that relates to a historical period that is going to be required in the filing at the time of the offering. So there's that little exception.

I just want to point you to our C&DIs, Compliance and Disclosure Interpretations. The ones under the 33 Act forms heading. These are on our web site. If you want to take a look at 101.04 and 101.05. Those two C&DIs really walk you through what financial statements, what information needs to be included in a draft submission, or in a filing, if you're an EGC or if you're not an EGC. So those can be really helpful.

The draft registration statements get to omit some more stuff. They don't have to include an auditor's consent. They don't have to be signed. And they don't have to have a filing fee paid at the time that those are submitted. And they can omit the financial statements that I talked about a little bit earlier. But otherwise, they too need to be materially complete. And they need to address all the line items that are required.

If you submit or file a registration statement that is not materially complete, what we generally do is send a letter that says, hey, your registration statement isn't materially complete and we're not going to take any action on it or do anything else with it until you file an amendment to make it materially complete. And I think that there could be a number of reasons why we would issue that letter. Or think that something is materially incomplete enough to issue that letter, rather than just issue some comments. But still, financial statements has really been the sort of biggest ticket item in that category. So.

SCOTT BENNETT: And just to-- one thing that tends to come up, if you're thinking about an IPO prospectus-- often the first filing or submission goes in-- the issuer thinks we're still probably a couple months away from doing an IPO-- knows that we're still going to figure out some more information around shareholders agreement or Reg Rights agreement-- some other related transactions in connection with the offering. It's quite common, as a matter of practice from the sort of our side of the table, and I think the staff is generally OK with this, to say we need to fill in more information on what our shareholder agreements are going to look like. And we'll do that in a later filing. And it starts off fairly short.

It still describes the business. It has the financial statements. It has an MD&A. It has all the core things, but there are some ancillary things that will need to go in the registration statement. Very often around ancillary agreements that are going to happen in connection with the offering. Or the charter and bylaws are summary, initially, but not fully baked yet. And that evolves over the next couple filings. I think people generally take the view that, that doesn't mean you're not substantially complete.

PAMELA A. LONG: Right. Right.

SCOTT BENNETT: Knowing that you can't make any firm statement on that.

PAMELA A. LONG: Right. So let me move on now to kind of what you can expect from the staff after you have filed this registration statement. So we've gone through this process. We will then assign the filing out, whether it's going to be reviewed or not, to an attorney in the group. We call this person an examiner, for the most part. This is the person who's going to be your major point of contact throughout the entire registration process. They'll call you up as soon as the filings are assigned to them. Then will let you know whether-- and by you, I mean, counsel, company counsel, who's listed on the facing page of the registration statement. Let them know whether the filing is going to be reviewed, and if it is, when you can expect to receive comments from us.

It does take a few days to screen and assign these things out. So it's probably not going to happen the day after you file. But I would say probably four or five days, business days. And if you haven't heard anything from us by that point, feel free to get a hold of the assistant director for the group that you figure you're probably in. And if you can't figure it out from looking at the website, just call any of the assistant directors and we'll figure out where your filing is. And get you to the right people.

The examiner will provide you with their contact information, of course, so that you can get in touch with them when you have questions during the course of the review. Like, hey, how long is it going to take you guys to review the amendment that we're going to file on Tuesday? Do you think we can have any shot at getting effective by Friday? You know, things like that. That's your person that you want to get in touch with.

This person, if the filing is going to be reviewed, will also do the first sort of level of review of the disclosure, and take the first cut at drafting comments. So they'll be very familiar with the status of what's going on in that regard. They will prepare and send out all of the correspondence on the review. So any comment letters, or if we're not going to review, they'll send a no review letter. If the filing is also being reviewed by accountants, which is often the case, they'll collect up all the comments from the accountants. And from any other office in the division who might be wanting to have some input into the letter, they'll assemble all that stuff and get that out to you.

And they will also be directly involved in helping to get the registration statement effective. So there's some last minute diligence that we do before we make a registration statement effective. You also need somebody who's going to interface with the assistant director for the group. Because the assistant directors are the only people that have the authority delegated from the Commission to actually make the filing effective. So somebody is going to need to be coordinating with them. And that's the examiner who will handle that.

A couple of things that we'll need from you at this stage of the game are email addresses for comment letters. We ask that you only ask us to send it to two email addresses. That's usually somebody at the company and counsel. And then, of course, you're free to do whatever you want with the comment letter after that. You can send it to however many people you think need to see it. But we'll ask for email addresses for two people. And we ask you to email them to us so that we can just copy and paste them into outgoing e-mails, and then we don't have to run the risk of any transcription errors or anything like that.

Also, at this stage of the game, if you have anything about your transaction that you'd like the staff to be aware of, this is a good time to point that out. So if you have specific concerns about timing-- I know I had a deal last summer that had specific timing requirements, because they also had a filing in a foreign country that was subject to specific timing requirements, and so they needed to make sure that our review was going to mesh with that.

But let us know about that type of thing. If you have anything about your filing that you think is novel about the transaction itself or the securities, or maybe you've had a conversation already with the Chief Counsel's Office or [INAUDIBLE] Office of the Chief Accountant, let us know that at the outset, and then we can make sure that we've circled back with folks elsewhere in the division that we need to talk to in connection with the review.

JOSEPH KAUFMAN: And it's important to note particularly as it related to accounting issues, is you don't have to wait until that first filing or submission to start engaging the SEC if there are particular questions that you think will be sort of a gating item in terms of both the timing, and getting through the SEC review. Certainly, on several occasions, I've talked with clients who are pretty sure that there's going to be an accounting issue, or something that will come up. And they've elected to actually reach out to the SEC accounting staff and engage in a discussion on a discreet issue in advance.

Again, what that does is one, it gets you an answer, and it does it in a way that doesn't necessarily affect your overall timeline. It's much better to know going in that, well, this big issue that could take us several rounds back and forth with the SEC has been resolved already rather than sort of waiting to do that at the back end. So certainly, something to think about as you're going in.

PAMELA LONG: So I'm going to move on to talk about the review itself and the comments. So the purpose of the review and comment process I just want to clarify, because I think it's sometimes a little misunderstood. It is disclosure based. We just want to make sure that investors have the information that they need to be able to make an informed investment decision. So we are looking for consistency with the requirements of regulation SK and the form that you're on, the financial statement requirements, GAAP, and so forth.

One of the things that the review and comment process sort of helps us with too is to be able to make the registration statement effective at the time that you request acceleration. So to do that, we have to make this public interest finding. We have to give due regard to the adequacy of information about the company, and the securities, and the offering that has been made available to the public. And if it's in the public interest, then we can make the registration statement effective. Going through the review process and engaging in the dialogue is something that sort of helps us to be able to be comfortable with that and support that finding and make the registration statement effective.

What the review process is not is insulation against any kind of liability under the federal securities laws for the disclosure that's in the filing. So we may issue comments. We may back off of comments. We may accept your response, agree not agree, not tell you whether we agree.

We may make the filing effective. There may be things that we decide not to comment on at all. And none of that is intended to relieve the company of any of its own responsibility under the federal securities laws for what's in that filing.

AUDIENCE: Can I ask you a question?


AUDIENCE: Given you are the gatekeeper at this stage, do you consider as part of your review consulting with other agencies, like [INAUDIBLE] or look at who are the names behind the issue, or particularly-- not in the obviously [INAUDIBLE] space, but you're doing a company for the very first time, are you interested to know who are the people who are the executive officers et cetera? You have a ability to tap in the databases to find that information.

PAMELA LONG: Right. So what we do when we conduct a review-- I mean, we have our own disclosure requirements, and one of them would be to identify the executive officers and directors of the company. So we look at the filing itself, and we'll look at other publicly available information. Typically, company web sites, maybe news, resources, things like that to help inform our review. But we're not doing an investigation or an audit of the information that's in the filing. We sort of assume that if you've put it in the filing, it's the truth.

So investigating-- if there's a suspicion that well, maybe these people that they've put up here aren't really the executive officers and directors, first of all, I don't know how we would know that, but that's not really the kind of thing that our division gets into. So we may have again, based on information that's in the filing or that's otherwise publicly available, if we see inconsistencies in that information, we may comment on that to try to get that straightened out.

AUDIENCE: Do you do news searches, like the most basic--

PAMELA LONG: We do news searches, yeah. We look at-- we look for different people have their favorite different search engines for that, but yeah, we'll look for that sort of thing. Yeah.

And then the other thing that we're not doing is a merit based review. So we're not-- when we take a filing effective, it's not because we think it's a good investment for any particular investor, or because we think the company is a good corporate citizen or deserves to get to go public. The merit based review idea is not at all what our purpose is in a review program. And I think that's one of the things that confuses people a little bit sometimes.

In any case, there are a few things I want to point out about comments, just things to know and think about. The comments that we issue are always specific to a particular filing, and the facts and circumstances of the company as they described them in the filing. And we try to issue comments that we think are likely to be material to a particular company. We try not to issue every possible technical comment that we might ever be able to come up with, because not all of those comments are going to be material to every company.

So with that in mind, I know people really like to try to figure out what the staff is thinking by looking at comment letters that have been uploaded, or that they've been able to find through other third party search engines, and I think those can be helpful, but just recognize when you're looking at other folks comment letters that for one thing, if you're not also looking at the filing, you're losing the context that that comment was drafted in. You also don't get to see things that we thought about issuing comments on and decided not to issue comments about.

And just remember that the fact that we decided to issue a comment to a particular company on an issue that maybe would also apply to you doesn't necessarily mean that you need to prepare a response of disclosure, because even if it applies to you, maybe it's not material. Something to think about, but I would just sort of-- you want to read those comment letters with a little bit of a grain of salt, I think. And think of them in the context of your own companies filing.

The types of the comments that we would issue, we ask people sometimes to amend the disclosure. Typically, if it seems like maybe they haven't fully responded to one of the item requirements, or sometimes disclosures just a little bit confusing, so we can ask for amendments for disclosure. We might just issue a comment asking for more information to help us understand your disclosure a little bit better. We might ask for your analysis as to why a company is conducting an offering in a certain way, or why they've decided to present their financial statements in a particular way. And sometimes, we ask for additional information to support the information that you've included in the filing.

So for example, sometimes we'll see information about a company's market share or the potential growth of a company's industry, and they'll site to a report, some third party report that they're using to support these statements. We may ask to see that report. And when we do that, we would ask for that supplementally, and there's a rule that provides for our ability to do that. It's rule 418 under regulation C. And I think on the Exchange Act side, it's 12-b4.

But a couple of things to point out about this rule. One is if you submit information in response to it, that is not deemed to be part of the registration statement. It's not deemed to be anything that's filed with us. It's really just a submission.

And then if you want to have that material returned to you-- which some people do sometimes. Maybe not like the third party reports, but sometimes some of the information that we ask for might be a little bit sensitive to the company. So for example, in the business combination context, we often get the board books that are presented by the financial advisor to the board of directors at the time that they give their opinion.

And so people might want to have those returned to them, and the rule provides that you can do that. You can ask for that, and that we will return it to you, provided that you have given it to us in paper format. So if you email it, you can't get rid of an electronic copy of anything, so we can't really return or destroy it. It's got to come in on paper.

And we can decide-- well, you need to make the request at the time you submit the information. And then we will return it to you as long as we think that it's in the public interest to do so. And we usually do return things to people that occasionally we might hold on to them for one reason or another.

This is another opportunity to think about confidential treatment. Which again, I will circle back to nearer to the end. But the material that you would submit under rule 418 is not automatically treated as confidential. And if you want it to be treated confidentially, you should submit a request to make sure that as long as the material is in our hands before we've returned it back to you, if we were to get a FOIA request or something like that, that the information would be protected.

JOSEPH KAUFMAN: So I think while you shouldn't necessarily assume you're going to get certain comments, I think it is fair to assume when you're presenting industry data in a registration statement that the SEC will come back and ask for that support to be provided. That's not always the case, but it's often the case. And just as a practice tip, it's far easier to have that support sort of identified and obtained at the time you're writing the disclosure and then set it aside and wait for that comment, than do all you're writing, make your submission, and that 30 days later, the SEC has a comment, then you've got to go back and scramble with what exactly was the support for this. So just easier to do it up front.

AUDIENCE: From a liability standpoint, if we were incorporating and get the registration statement or third party report, you then would have section 11 or section 12 liability, right, based on whatever the content is. Because aren't you taking on the responsibility to make sure it's not misleading? The third party content that you've now incorporated into your registration--

JOSEPH KAUFMAN: So the question related to third party reports and liability in the registration statement. Generally, the company and the directors and officers would have liability. And underwriters for statements made in a registration statement, you have the due diligence defense for people outside the company. In certain situations, you can have expertized information, where if you follow through the steps and it's identified as an expert, there is a higher standard in terms of the liability, particularly for underwriters and directors and officers, similar to the expertized portion of audited financial statements. The auditors are considered an expert for that part of the registration statement.

I would say most of the industry data that we use doesn't rise to the level of being expertized. It's information relating to either government data that's public, widely available, or perhaps some other third party report that was prepared specifically for the filing. And they're providing it, and in certain cases, citing to it, but I don't think that we or the SEC would take the view that that's necessarily expertized for purposes of liability. So ultimately, it's the company's responsibility, even if they identify it's coming from a third party source.

PAMELA LONG: Yep. So let me talk briefly about staffing the reviews. I've mentioned the examiner. The examiner tends to be somebody who's maybe a little bit more junior on the staff, and then we have a more senior person that we'll call the reviewer who is sort of a second set of eyes on the filing and on the comments that the examiner has proposed.

The reviewer is more focused on kind of big picture issues, big picture of legal issues. The examiner will focus on them, but also does a real detailed review of the filing. And then the second reviewer also tends to be somebody who's more experienced and can sort of make sure that the comments that we're issuing, we're applying a consistent standard materiality to the comments that we're issuing, and we're treating issuers in the same industry similarly and that kind of thing.

On the accounting side, if we have an accounting review of the filing, it's a similar set up. So there's somebody that starts, and somebody that oversees the person that starts. A lot of the folks on our staff though nowadays have been there for quite a while. So even people who are taking on an examiner role in a particular filing review are often really experienced people. We think that it's important and it's a good practice to make sure there are two people of each discipline who are looking at the filings.

So I'm going to move on and talk to you a little bit about how I review a filing. I'm sure everybody has their own methodologies for this. And I've probably done it 1,000 different ways in the time that I've been at the commission.

But what I kind of like to do is think of the registration statement as containing two stories. There's the story about the transaction itself. What are the securities that are being issued? Why is this company even doing this right now? What's the type of transaction that they're doing?

And then I think separately about-- or I focused separately, I guess, on the company disclosures. What does this company actually do? How well does it do it? What's its management like? Those types of disclosures.

So often, when I get a registration statement to review, I'll start out by thinking about the transactional end of things. I'll take a look at the fee table right on the cover page, right on the facing page of the registration statement, which can sometimes give me a lot of insight into what is to come. Obviously, if it's going to be like an allocated shelf offering, you'll see a bunch of different securities listed.

But sometimes, you'll see common stock, common stock, common stock, and then there are footnotes for each of those separate line items that explain well, these are shares of common stock that we already have outstanding, and they're being resold by existing shareholders. And then the next one will say, these are shares that underlie warrants, our class-a warrants that we issued last year. And I think that that can be really helpful, because it helps you to sort of anticipate what you're going to see next in the prospectus, and think about where are all these securities coming from, and who is really offering them? Is it shareholders who are already holding the securities, or is it an offering by the company?

And then I just go to the prospectus cover page, which gives some more narrative about what's being offered, and by whom, and in what type of transaction. And weirdly enough, sometimes what is on the cover page of the prospectus is not what is described in the fee table. So we may have comments about that.

One kind of word of caution I like to try to remind people about on cover pages is that they are supposed to only be a page long under our rules. Sometimes, that information spills over into a second page, and that's probably OK. But I've seen some of these things, even pretty recently, that will go on for like three pages, and it's italicize type, and it's really small, because I think that, folks-- they get started describing the transaction, and they just can't cut it off. And a lot of that information is going to appear in the next couple of pages anyway in a summary section.

So what we really just kind of want on the cover page are things that are really key to an investment decision, and the stuff that's required by item 501 of regulation SK. So it's really kind of like just a little snapshot. Here's what's going on. Here's what the transaction is. Here's what the securities are. And here's who's selling them.

And this is the type of a transaction, so this is the type of distribution. So you should be able to look at it and know whether it's going to be a firm commitment, or maybe it's some type of a min-max offering, or best efforts offering. And those types of offerings have specific disclosure requirements that do need to be addressed on the cover page as well.

But again, it's really just-- it's OK. Not everything about the offering has to appear there. It's probably coming in the summary anyway, and it will definitely be back in the plan of distribution and elsewhere in the document.

SCOTT BENNETT: I drew that comment once.


SCOTT BENNETT: We were doing a rights offering for depositary receipts, in respect of convertible preferred stock, which converted into common stock when a concurrent proxy vote occurred which authorized enough room for the common stock, and all of that was backstopped by a sponsor. And I think we spent a day and a half trying to get it down to one page, and we just couldn't do it. The font, you almost couldn't read any more.

I think we had to beg to get two pages and we got it. But other than that scenario, which was the-- I think our fee table had seven different securities, because it was the rights, and it was the depositary receipts, it was the under-- it was everything. Other than that, there's really no reason to exceed a page.

PAMELA LONG: Yeah. And you know, I think-- and this is going way, way back, but know when we adopted the plain English rule, we came out with this plain English handbook-- which still resides someplace on SEC.gov-- and it will give you some good tips actually, for how to pare down things. You don't have to define every term as it appears on the cover page. There's just some good information in there, I think, that can just help you think about how to present that information a little bit better.

We don't issue that as a written comment too often. That's why I like to just kind of remind people about it when I come out to do this panel. You may never see that comment, but it is still a requirement. It's in item 501.

So again, I'll look on the cover page to try to discern what type of a transaction it is. And I'll get my head around what are the things that I'm going to have to be thinking about as I go through this registration statement, based on the type of transaction it is. So just to throw out a few little examples of what I'm talking about here.

The transaction might be for the resale of shares by an equity line purchaser. So the company's-- I know there's going to be an equity line agreement in there someplace. I need to start thinking about does this company-- is this company eligible to do an equity line? You need to have a market in your securities to do those. And sometimes they don't. I mean, pretty recently I had somebody file one, and they don't-- there's no market in their securities, so we had to tell them they weren't eligible to do that type of a transaction.

Another example, unallocated shelf registration statements. You're supposed to have a public float of $75 million. If not, maybe you can proceed under instruction 1V-6 that requires specific disclosure about that to be on the prospectus cover page. We'll be looking for that.

Pipe transactions, these are transactions where the company will privately placed a security, usually some type of a convertible security, and then register the resale of the underlying. That private placement needs to be complete. So I'll be thinking, I'm not going to get this necessarily from the cover page, but somewhere in this filing, there's going to have to be some disclosure that makes me comfortable that that overlying sale, the private sale, has been completed.

I'll pay attention to how the offering is priced. Typically, in a firm commitment underwritten IPO, you're going to have a price range. Sometimes, a company that is not a reporting company yet will file a resale registration statement and say, well, we're going to sell these shares at the market, or the resellers can sell at market price.

Well, if there's not a market yet, you can't sell at market prices. So we'll have a comment that we'll ask them to fix a price until there is a market. And then say that at that point, they could sell at market prices. A company might want to do it at the market offering as well. Again, there's eligibility requirements associated with that that we'll be looking for.

And then how will the securities be distributed? I mentioned a second ago that min-max type offerings have certain disclosure requirements that need to be included on the cover page, like what is the minimum? How long is this offering going to last for? Is there going to be an escrow? So I'll be looking for things like that.

And then I'll be looking-- next, probably, I'll go to the plan of distribution on almost all of these next, to see the more elaborate disclosure about how the securities are going to be distributed, and make sure that it is also consistent with what I've seen on the cover page. And sometimes, it's not. So that can be a source of comment sometimes.

If there are resellers, there are a few issues that sometimes come up with those. I'll go to the selling shareholder table, and I want to make sure that, first of all, the shares that they end up listing in there, just the number of shares is consistent with what they've registered. Sometimes, it's not. So we'll follow that up.

We also want to make sure that any material relationships between any of the selling shareholders and the company are disclosed. And if there are selling shareholders that are entities, we'll want to kind of dive down a little bit and make sure that whoever the beneficial owners of those shares are. So whoever controls the voting and disposition of those shares on behalf of that entity, find out whether they've had any material relationships with the company.

And then sometimes, we run into the issue of resale registration statements where all of the circumstances of the ownership of the shares and the proposed resale of the shares really seems more like an offering by the company than a true resale by selling shareholders. And one of the things that is sometimes indicative of that is if the amount of shares that's being offered for resale by company insiders is very large in comparison to the company's public float. It's not necessarily going to carry the day in all circumstances, but it's enough to make a start considering whether really what's happening here is a primary offering.

And we have a C&DI-- and I apologize. I don't actually have the number of it written down. But it talks about some other criteria that may indicate that a registration-- or that a sale is really by a company, rather than by the selling shareholders. And that then in turn, if it turns out that, hey, this really does seem more like a primary offering by the company, then they have to be on a form that they're eligible to do a primary offering on.

They may need to price the offering. They may need to identify the resellers as underwriters. So there are things that flow from that.

AUDIENCE: Do you do it by percentage? Do you look at the executive to come up with, like, are you thinking--

PAMELA LONG: Yeah, it's really the facts and circumstances, and there aren't a bright-line test. But I would say that if you notice that there's a lot of shares-- and there are other things to consider too. What were the circumstances under which they got these shares? Is this reseller somebody that is kind of a market participant?

It's a very sort of facts and circumstances thing. And sometimes, we'll go a round or two of comments with companies to try to flesh out what's really happening there. I also go back and I look at the use of proceeds section. If this is a capital raising transaction, why is the company doing this? What are they going to use these proceeds for?

Certain types of uses of proceeds in the instructions to item 504 of regulation SK, there may be particular disclosure requirements around particular uses of proceeds. So like if you're going to use some of the proceeds to pay off debt, you may need to include information about when that debt matures, what's outstanding, are there any related parties that are connected to that debt? That type of thing.

And then the other thing is we see best efforts offerings sometimes. And in those cases, we like to see a disclosure about uses of proceeds, assuming that the entire offering isn't sold. So what people often put in there is if we sell 25% of the offering, this is how we're going to use proceeds. 50%, this is how. 75%, you know. And they'll include those kinds of disclosures. And we do like to see those kinds of disclosures for that kind of an offering.

And then the last thing that I throw in the transaction bucket here, the last big thing is the legality opinion. Legality opinions, the first thing I'm looking for is making sure that the securities, the amount and type of securities that are opined upon there are the ones that are actually being offered in the offering. And again, sometimes things get overlooked, and it doesn't quite cover everything. So we'll issue comments about that.

But there are other areas that we might comment on with regard to a legality opinion. And I think that you can predict what any of them would be by looking at Staff Legal Bulletin 19. I've issued a lot of comments on legality opinions in the many years I've now worked at the commission, and I can't imagine any that I might have issued that you wouldn't be able to find a basis for someplace in that Staff Legal Bulletin.

It also covers tax opinions, by the way. So if you find yourself in the position of giving either a tax opinion or a legality opinion, you might want to have a look at that as you prepare the opinion. And know that we can comment on them. I know that sometimes legality opinions kind of make their way into the filing toward the end of the process. Sometimes, we do have comments on those, and it's good to try to get them in ahead of time enough that it doesn't slow things up to have to respond to comments on your legality opinion.

JOSEPH KAUFMAN: One of the issues there though is oftentimes, you don't know the overall number of shares until it's time to launch the

PAMELA LONG: Roadshow. No, I understand. Yeah.

JOSEPH KAUFMAN: Plus, in a lot of circumstances-- at least the one's I've dealt with-- you're also trying to adjust the stock price so it's something that's sort of within a range of what is typical for an IPO. So it often involves either a stock split if the price is too high, or a reverse stock split if the price is too low. And often, that doesn't get determined until you're ready to launch the roadshow. So there is a lot of moving pieces that may get dropped in towards the end, even though you do want to get that opinion in this.

PAMELA LONG: Right. Sometimes people will give us a form of the opinion, which can cover a lot. I mean, maybe not those types of details, but it can cover a lot of other things. So we'll be able to see, for example, if we think there are assumptions in the opinion that are not OK, or if there are jurisdictional limitations in the opinion that would cause concerns. So it gives us a chance to at least get that stuff addressed.

So that's kind of the transactional end of things. And then I move on to the company disclosures. This is disclosure that you find in the summary, in the risk factors, in the financial statements, in the MD&A, in the business section, in the executive compensation and all that.

One of the first things to stop and take account of here is is this a smaller reporting company or an emerging growth company? Because if it is, they may have some scale disclosure that they include, rather than the full blown disclosure that would be required of a company that is not an EGC or a smaller reporting company. I usually start in the summary, just to get sort of a general sense of what the company does.

Sometimes, I'll have comments in the summary if I feel that it's not balanced. If all I'm hearing is the good news from the summary section, but I know that from reading later in the document, that maybe the company has actually lost money every year, or there are particular risks that attend some of the strategies or things that they describe in that summary section, we will try to get some more balanced disclosure up there. But I'll start there, and then I may go back to-- may go back from there to-- well, usually, I just go straight to the risk factors from there.

The risk factors will also give you a lot of information about how the company operates, especially the meaningful risk factors. Now, I know there are often a lot of boilerplate risk factors that--

JOSEPH KAUFMAN: They're all meaningful risk.

PAMELA LONG: To me, some are more specific to the company than others. So I do see risk factors sometimes about some day we may acquire a bunch of other companies. And if we do that, we might get distracted from our core business, and that could result in a material effect. That's like in every filing.

But I get it. I get that people want to put that in there. I don't object to it. It's fine. But it doesn't really inform the rest of my review when I see risk factors like that, unless it's really part of the company's current strategy, and they've been out of acquiring companies, and they are lining themselves up to continue to do that.

JOSEPH KAUFMAN: There's one that our management is really important, and if we leave-- if they leave, it could cause problems.

PAMELA LONG: Someday, our CEO will die or retire. And when he does, it might take a while for us to find someone to replace him.

SCOTT BENNETT: Which is like an insult to management if you don't--


PAMELA LONG: Well, I tend to focus on risk factors that I think to me seem more unique to the company. Or maybe they've experienced an event or a trend before and it's had an impact on them, and it could happen again. Things like that I think are more informing to me about what else I'm going to see and what else I might look for in the filing. I'll go to the financial statements, and I'll take a look for any material changes in line items, and think about hey, when I get to the MD&A, I want to go and see what went on there.

The MD&A is a section that is commented on often, I think. It's something that gets discussed in panels like this quite a bit. And I think you guys are probably going to talk about it some more this afternoon as well.

The comments there are often really, really specific to what's going on with the company, and what's disclosed in its financial statements. But I think I can say a couple of general things at this point, observations that I have on it. And none of this is new stuff.

But what you want to see and MD&A is some value added to the financial statements. So not just a recitation-- a written out recitation of what's already there, but something that explains. For example, explains a material change in a line item in the financial statements. And it's an analysis in discussion.

So I think the types of comments-- although they are all very specific-- there's kind of three buckets that I see, or that I think that I can put a lot of the comments into. The first bucket is explaining the reasons that underlie these changes in financial statement line items. And not just to say something like, our revenue increased, because we sold more products.

Well, that's great, but what are the drivers there? So we'll look for information like that. Sometimes, we see disclosure that kind of gives a long list of all of the things that impacted the company's performance in a year, but nothing is really-- it's not clear which things are more material or less material. So we may issue a comment asking people to quantify if possible the impact of each of these different items that they list out.

The second bucket is on liquidity. I see sometimes some pretty summery disclosure where people just sort of say, yep, we think we have what we need to keep moving forward here. We think we have sufficient liquidity. But they don't really talk so much about what are the demands that are coming up on the liquidity, and how will they meet those demands. Particularly if the thing that they think is going to supply them with liquidity somehow becomes unavailable, whether that's a credit agreement, or whether that's maybe a downturn in the business, so you're just not making as much money.

We kind of want to see a thorough discussion of that, and on a long-term and a short term basis. So yes, for the rest of this year, but also after the rest of this year, what are the demands going to be? And how are you going to fund those demands?

And then the last area is the trends, events, and uncertainties in general. Like, what are the things that the company is experiencing, or could experience? Whether it's unique to them, whether it's something that impacts everybody across their industry or something even more global that maybe has had an effect already, or it could have an effect in the future.

And this is where-- this is when I go back and think about what were some of those risk factors I just looked at? I certainly don't expect to see every risk factor repeated in MD&A and disclosed there, but occasionally, there is something that's very specific that may already have impacted the company that may be lingering, or that may be coming down-- coming up in the future. That just seems to be more sort of real and immediate. And I may ask if I don't see a discussion in there about whether the company has considered including something in MD&A to describe that.

AUDIENCE: Maybe take the steel and aluminum tariff-- so let's say that goes through, and he actually does it. So two weeks from now, three weeks from now, you get a registration statement either a steel or aluminum company. Would your expectation for the staff be that they need to address impact on that tariff? Is it like that lie or is it more macro than that?

PAMELA LONG: I think it's-- is it more macro than that?

AUDIENCE: That's pretty deep. That's like--


AUDIENCE: That's a known trend. That's very obvious.

PAMELA LONG: Right. Well, if it could have a material impact on the company, then it may be a trend that they need to-- or an events or an uncertainty that they need to describe. I mean, I've definitely seen people talk about regulatory and legislative uncertainties, where if they are to come to fruition, they would really change the way the company does business, or how the company makes money. And that is-- sometimes, that is disclosed in the MD&A.

I mean, if it's-- I guess in a vacuum, it's hard to really say that we would require that. But we might ask a company to consider whether that's something that is a trend or an event that should be discussed in the MD&A. So, yeah.

JOSEPH KAUFMAN: I mean, in that example, like right now, you would only be including an MD&A for the 2017 fiscal year, and this is something that's happened afterwards. So clearly, you would want to be telling your reader that future-- your future results might be impacted by an increase in a supply cost. Something like that. Would.

AUDIENCE: Would, right?

JOSEPH KAUFMAN: Right, yeah. Because it's not reflected in the results that you have in your financial statements, but that is certainly something that's going to likely impact in subsequent events.

SCOTT BENNETT: And it'll flow through the rest. You know, we're talking about MD&A now, but if you were a foreign steel producer, it'd be in risk factors, and it would be potential problems. If you're US, maybe you're actually highlighting it in the equities story, and saying, we think this is going to be beneficial for us, because the foreign competition may be less. So it will work its way throughout the document, probably in addition to just right there.

PAMELA LONG: I want to make sure that we get to talk about confidential treatment. So let me just move on to that right now. As I think I mentioned before, there's two types of confidential treatment requests, and 3 and 1/2 ways to request them, depending on what the material is that you want to have treated confidentially and protected.

The first one that I want to talk about is a rule or rules that apply to information that's actually filed with the SEC. In the Securities Act context, this is rule 406. And in Exchange Act context, it's 24b-2.

So what these really apply to in practice are things that companies file as material contracts. They file them as exhibits to a registration statement or a periodic report. And in those material contracts, sometimes there may be disclosures about commercial information that the company believes will be-- it will be significantly competitively harmed if that information becomes publicly available. So these rules let an issuer redact that information, the competitively harmful information from the material contract, and then file that redacted version of the material contract as their exhibit.

The catch with this is that you also have to file an application. And the application has to meet a lot of or some procedural and substantive requirements. So you want to take a close look at those rules to see what those are. And we have a Staff Legal Bulletin, which is extremely helpful for preparing these. It's Staff Legal Bulletin 1A.

But what happens is you prepare this application, and you send it to the Secretary's Office of the SEC. And then it makes its way down to the AD group that has the company that has filed the application. And then we screen it, and we may review it, and we may issue comments on it. So if you're in registration and you have a contract that you have provisions that you want to maintain the confidentiality of, it's a good idea to try to make this application-- file the contract as soon as you reasonably can, and make this application at the same time. Because you may get a whole separate track of staff comment and response letters going on this, and we need to get these resolved before we can make the registration statement effective.

So under this particular type of request for confidential treatment, the result of it is at the end of the comment process. And kind of just to give you a little bit of a flavor of the kinds of comments that we might issue here, the application has to explain why the company would be significantly competitively harmed if the information were disclosed. And the information that gets redacted should really be limited as much as possible to just words and phrases or numbers, things like that. Not entire paragraphs, entire pages, that sort of thing.

So the comments that we sometimes issue on requests for confidential treatment are things like your justification doesn't seem very specific. Enhance your justification to tell us really why you're going to be competitively harmed if this is disclosed. Or narrow the redactions down to specific words and phrases. Don't just wipe out an entire paragraph or an entire page. So that's the kind of back and forth that we might have.

After we get through that process, part of the application is also that the registrant asks for the period of time that they would like to have this treated confidentially. So it's not infinite. Typically, what we'll take is the term of the contract, or 10 years. Whichever one of those things comes first. Now, if the contract is going to renew automatically or extend beyond 10 years, you can always come back when the confidential treatment expires and ask to have that renewed. And when we do those all the time.

But the good thing for all of this work that goes into these confidential treatment requests is that you get an order. The commission issues an order at the end of this process that protects the information. So if a FOIA request comes in, we've already got the order there, we don't really even need to go back to the company. The order is already there to protect the information.

Now, this is in contrast to the other type of registration-- or sorry-- the other type of request for confidential treatment that we get, which is under rule 83 of the FOIA. And rule 83 basically just applies to everything that there's not another more specific rule for. So for us, what that tends to mean is rule 83 would cover requests for confidential treatment of provisions of response letters that you may send back to us in response to comments that we issue.

418 material, that's supplemental material that I mentioned a minute ago that you might want to have protected. And also, draft registration statements that are submitted not under the JOBS Act-- or, yeah-- not under the JOBS Act, but submitted under the staff policy. So again, let me just run through quickly kind of how you would make those requests.

If you are preparing a response to a comment letter and you have information in that response letter that we need to see, that you need to give us to be able to respond to the comment, and you believe that it would be competitively harmful to the company if it were disclosed, you can submit or file that response letter with that information redacted on the EDGAR system, and then separately mail in a hard copy of the unredacted letter and the request for confidential treatment. That goes to the FOIA office. And I think people typically send it to the staff and the FOIA office at the same time.

And then what three does is you don't have to make the justification up front as to why you're going to be harmed. You just have to say you'd be harmed, or that you're requesting rule 83 treatment. And then if a FOIA requests comes in, at that point, we'll get in touch with the company and give them the opportunity to make those arguments.

The rule 83 requests last for 10 years. That kind of seems like a good amount of time, I guess. So that's how you would do that for a response letter.

For 418 material, again, it's similar to doing a response letter, except you're not going to file a 418 material on EDGAR. You just send that into the staff. And then lastly, the draft registration statements. So when you make these requests, they have to be done on paper. Draft registration statements are to be submitted on EDGAR.

So in order to prevent the FOIA office from being inundated with a whole bunch of paper filings that are only being done on paper for purposes of requesting confidential treatment, we kind of came up with another way for people to do this. And that is that you go ahead and you make your submission on EDGAR. And when you provide that cover letter that I mentioned earlier, you request confidential treatment in that cover letter, and you submit that cover letter under a form type or a submission type which is DRSLTR. And you request the rule 83 treatment there. And so then, if we get a FOIA request in before the time that the company has to file it publicly anyway, then the draft registration statement is protected from that.

Reminder, I should have said this while I was talking about the response letters. But response letters become publicly available-- as you probably are already well aware-- about 20 business days after a registration statement goes effective. So that is a reason that you would want to maintain confidentiality of competitively harmful information.

JOSEPH KAUFMAN: Is there any update on whether or not there may be some modifications to the confidential treatment process?

PAMELA LONG: I mean, I know what you know.

JOSEPH KAUFMAN: I don't know much other--


JOSEPH KAUFMAN: They've come out with a-- it's a conceptual release. Certain types of confidential treatment that are commonly, requested usually for business contracts, where the disclosure would be competitively harmful. Those tend to be-- particularly post IPO, most often the types of confidential treatment letters you have to submit.

Under the conceptual release, you wouldn't have to actually go through the pain and suffering and coming up with all of the rationales up front. But instead, sort of note what you were doing and be prepared to justify it down the line if necessary, which would be extremely helpful. But so far, that's not the rule.

PAMELA LONG: Right. Exactly. So let me move on from requests for confidential treatment, just to talk about effectiveness for a minute.

So once our review is complete, the examiner is going to get in touch with counsel and let them know that we don't have any further comments, and that the company can request acceleration. And we ask that you wait till you get that call before you submit the request for acceleration. Because in general, it's our policy when requested, that we grant acceleration. But if we're not through the comment process yet, we can kind of get ourselves into a little bit of a bind with the company. So please do wait until you hear from us that we are through the comment process.

And then it's always a good idea to let the examiner know what's going on, and what your expected time frame is for requesting acceleration. It's just really helpful for us to plan, and to make sure that we're all on the same page about issuing any additional comments and getting those responses back in, and making sure that we have an assistant director who's available to make the filing effective at the time that the company wants it to go effective. People do take vacations and leave the office for various reasons, so we'll need to make alternate plans if we know that a filing is going to go effective while the AD is unavailable.

The requests for acceleration has come from the company, not from council. The underwriters also have to request acceleration and provide information about the distribution of preliminary prospectuses. So you request the acceleration say, it's 4 o'clock Tuesday. So on 4 o'clock Tuesday, if all goes well, the examiner will call up council and say your filing is effective.

And overnight, a notice is posted on EDGAR. And if you look for it the next morning, it's under the label effect. And that just confirms the effectiveness, and the date and time of the registration statement.

And then again, after effectiveness, the comment letters and responses to comment letters are publicly posted, no sooner than 20 days after effectiveness. And I think they're pretty timely now. So it's probably right at about 20 days after effectiveness that those come up.

A few tips. I have two more minutes. Unless you guys have anything else?



PAMELA LONG: So let me just throw out a few random tips. Maybe things that I said or that I forgot to say while I was going through everything else here. We talked about making sure that you file a materially complete document. That is important.

If you get a comment letter from us and you don't think that you understand what we're asking for, at the bottom of that comment letter are going to be listed all the staff that are working on that review and their telephone numbers. Please, feel free to use those telephone numbers and call the staff and get an understanding of what it is we're really looking for if something seems confusing. Because that might save a lot of time in the long run. A lot of back and forth, potentially.

And also pay attention to really what the comment is asking for. We're not always asking for you to amend disclosure. Sometimes we just want to kind of have a dialogue about something in the filings. So make sure that you understand what it is we're asking for.

I guess the flip side of that is sometimes we are asking for an amendment, and we just get an explanation in the supplemental response. And then we'll get back out with another comment. So watch out for that.

Let me find some good ones in here. Oh, if you have significant changes in your transaction, or some significant changes happen to the company, and you make a bunch of new disclosures in the filing about that, it's helpful to us if you kind of point that out in a cover letter. This is like on an amendment, after we've already issued a round of comments or so. It's helpful to us if you can kind of point that out.

I was going to say something earlier, but I thought I would run out of time about executive compensation disclosure. So let me just say it now. Unlike financial statements, if you're on form S1, executive compensation disclosure needs to be updated immediately after the end of a fiscal year, or after the beginning of the next fiscal year.

So let's say you have a December 31 fiscal year. You come in with an amended registration statement or a new registration statement in the middle of January, and you don't have that most recent fiscal year end executive compensation. I mean, that's going to draw a comment.

Unlike form S3 issuers who get until the time that they file the 10K to provide that information, an S1 company needs to have that in there right away. And we do have a C&DI on this. But I think it kind of takes people by surprise a little bit sometimes, so I just throw that out there for your consideration.

We're a minute over, but let me just quickly say that I know everybody probably wants to know about like the timing of reviews. So we typically try to get a first comment letter out to folks in about 27 to 30 days. And after that, anything can happen. And this is why it's a good idea to be in close touch with your examiner.

But in terms of how long it takes to get through amendments and how long the overall process takes, it's hard to predict. Because it will depend on how responsive the company is, the complexity of the issues, the number of issues that we raise, how timely the company is in getting back to us, and things like that. But I did want to tell you about the 27 to 30 days. So we have that.

JOSEPH KAUFMAN: So it wouldn't be realistic if you were filing in March to assume that you could do your IP on April.

PAMELA LONG: That's right. That is correct. That is correct.

JOSEPH KAUFMAN: But after that it's-- and it can be frustrating, because sometimes you do get on subsequent amendments comments back 10 days, and there are other times when you're on the 16 and 17, and everybody's hopping up and down and we don't know what's going on.

PAMELA LONG: I mean, I think in general, we try to get-- we try to respond to amendments within about 10 days. But I mean, that really even depends on where you're at in the process. So the earlier you're at in the process, probably the longer it's going to take, because you're still at the beginning phase of resolving complex issues, and you're going to have the most comments at that point. You get closer to the end, things will start moving faster.

But if you have questions, again, as you go through this process, call the examiner, talk to them. Let them know what your timing concerns are. We do try to accommodate people as best we can. still have to get our job done, but we do definitely try to help out and not get in the way.

SCOTT BENNETT: And I think one timing thing people should expect. The first one is 27, 30 days. We know that. The follow ons can be different periods of time.

But if in one of those follow on you're filing a new audit with a new, fill set of financials, new MD&A-- and I say that, because that's actually happening right now for a lot of companies that are in the IPO process, because they're just finishing up with their audit for the prior year, sort of late Feb, March. If you're doing an IPO filing right now, you need to include the prior year. And there's a lot more disclosure going in, and probably should expect some extra days.

PAMELA LONG: Yeah. Right. OK.


PAMELA LONG: There we are.


PAMELA LONG: Thank you, guys.




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