May 4, 2017

Corp Fin’s IPO Comments Continue to Decline

There are all sorts of interesting tidbits in Proskauer’s “IPO study”, but this one in particular jumped out at me:

We continue to see a decrease in the average and median number of SEC comments in the first comment letter. Since 2013, there has been a 40% decrease in the number of first-round comments. This decrease appears to be partially related to issuers receiving fewer boilerplate comments, i.e., comments that are not issuer specific and relate more to general process requirements.

In addition, the only JOBS Act-related comment that appears to still be issued consistently is the request for testing-the-waters communications materials. 2016 also saw a significant decrease in the maximum number of comments issued in a first comment letter, decreasing to 55 from 78 in 2015 and a three-year average of 85 from 2013 to 2015. The average number of comment letters received by an issuer during the SEC review process was four. The average number of comments in the first, second and third comment letters were 25, six and four, respectively.

Despite the decline in comments, the amount of time required to complete an IPO continued to climb – rising to 221 days in 2016 from 156 days in 2015 and 123 days in 2014.  The study suggests that the increase was likely attributable to increasing market volatility.

IPOs: Handling Comment Letters

While we’re on the topic of IPO comments, here’s a recent PwC blog by Corp Fin’s former Chief Accountant, Wayne Carnall, with advice to companies on how to deal with Corp Fin comments.  Although the blog focuses on IPOs, much of Wayne’s advice is applicable to comments received in other settings. For example, here are some thoughts about the implications of comments & responses ultimately being made available to the public:

Remember, the comment letters and responses are public information shortly after the registration statement is declared effective. Even comment letters related to EGCs (Emerging Growth Companies), which have the ability to submit an IPO confidentially, are made public.

These letters & responses are part of your public communications and should be viewed the same as disclosures included in the S-1. The financial press writes stories about issues raised in the comment letter process. You do not want your company to be the subject of an unflattering story based on a poorly drafted response letter.

DOJ: Staying the Course on FCPA & White Collar Enforcement

This Wachtell memo says that recent remarks by Acting Principal Deputy Assistant AG Trevor McFadden suggest that the Trump DOJ will continue to aggressively pursue FCPA & white collar enforcement. Here’s an excerpt:

In these speeches, McFadden rejected what he called the “myth” that DOJunder Attorney General Sessions was not interested in prosecuting white-collar crime. McFadden emphasized that DOJ continues to “vigorously enforce” the Foreign Corrupt Practices Act, cited with approval a robust record of FCPA prosecutions in 2016, and praised the recent hiring of additional prosecutors in DOJ’s FCPA Unit, thereby suggesting that the new administration will maintain a significant
commitment to FCPA enforcement.

McFadden also praised two recent Obama Administration corporate resolutions, that imposed hundreds of millions of dollars in penalties, required criminal admissions & the retention of independent monitors. He also said that AG Sessions was committed to individual accountability for corporate misconduct.

John Jenkins