February 19, 2020

SEC Comment Letters: Tips to Ease Your Response Process

Responding to SEC comment letters can be tricky, so it’s always nice to read tips from Corp Fin on how to make the response process more efficient.  This Deloitte memo summarizes Staff comments at a recent AICPA conference, which were aimed at helping companies respond to comment letters.  Here’s an excerpt:

– Provide the Staff with contact e-mail addresses for the responding company and its outside counsel

– Before providing courtesy paper copies, ask the reviewer if copies are needed or will be used.

– Clearly and directly address the issues raised in the comments.

– Share views on materiality with the Staff early in the process to increase overall efficiency

– Don’t assume that the SEC has accepted an item solely because it has been reported similarly in another company’s filing

– When calling the Staff with an interpretive or procedural question, don’t assume that the Staff has all the facts. Responding companies should do the appropriate research, provide sufficient background information, and present an analysis that points to relevant authoritative literature

– Communicate the intended use of novel transactions up front

– Call the Staff to discuss or get clarification on a Staff comment

Also, don’t forget that members have access to our Handbook on the “SEC Comment Letter Process”  – a 39-page guide to help you through responses.

Change to Nasdaq Definition of “Family Member” Approved

Last week, the SEC issued an order granting accelerated approval of Nasdaq’s amended proposal to change the definition of a “family member” for purposes of determining director independence under Nasdaq’s Listing Rules.  Under the new definition:

“Family Member” for purposes of determining whether a director is independent under Nasdaq Rule 5605(a)(2) means a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home.  As stated by Nasdaq, the purpose of the proposed rule change is to exclude domestic employees who share the director’s home, and stepchildren who do not share the director’s home, from the types of relationships that always preclude a finding that a director is independent.

This Cooley blog from Cydney Posner discusses more of the details as the new definition leaves the board to determine whether stepchildren not residing at home with the director still have a relationship with the director that could interfere with the director’s exercise of independent judgment.

More on “Cyber Response Plan Testing”

Yesterday, I blogged about the importance of testing a cyber response plan. Another great planning tool is reviewing and analyzing a real life example of how another company handled disclosure and response to a data breach.

Thanks to Jay Knight at Bass, Berry & Sims for sending along this blog that does just that – it walks through Chegg, Inc.’s disclosure and response to a 2018 data incident.  The blog includes the back and forth between Chegg, Inc. and Corp Fin as they worked through the comment letter process.  It’s a quick, helpful read – topics covered in the exchange between Chegg, Inc. and Corp Fin include:

– Timing of public disclosure

– Disclosure controls and procedures

– Materiality of the incident

– Remedial actions

– Lynn Jokela