August 26, 2013
The SEC’s review of the draft prospectus disclosure is often one of the most time-consuming and stressful parts of the IPO registration process. An initial SEC comment letter typically includes more than 50 comments, many of which may require substantial changes to the disclosure.
By recognizing and avoiding common pitfalls beforehand, practitioners can reduce the number of comments received from the staff and shorten the overall SEC review process.
Some of the most common subjects of SEC staff comments on first draft IPO prospectuses include:
- Issuer statements about competitive position and industry trends, including requests to:
- clarify the basis for issuer statements, whether objective or subjective;
- identify and provide supplemental copies of third-party studies and reports; and
- file all required third-party consents.
- The risk factors, including requests to:
- provide specific, quantitative information for each disclosed risk; and
- remove mitigating disclosure.
- The MD&A, including requests for additional disclosure on:
- critical accounting policies; and
- liquidity and capital resources
- Plain English principles, including requests to revise or eliminate:
- technical jargon; and
- marketing language and “puffery.”
These are just a few of the staff comments discussed in detail in Practical Law’s Practice Note, IPO Prospectuses: How to Avoid or Respond to Common SEC Comments.
For each type of comment discussed, the Note provides:
- Illustrative comments taken from actual SEC comment letters issued in recent IPOs.
- Practical guidance on how to avoid this type of comment as an initial matter or, failing that, how to respond effectively to the staff’s concerns.
To read the Practice Note, see: http://us.practicallaw.com/7-517-8867