August 30, 2021

Staff Comments: Tips for Analyzing Comment Trends

This recent blog from Perkins Coie’s Jason Day discusses the merits of in-house lawyers attempting to keep on top of SEC Staff comment letter trends.  The short version is that Jason thinks it’s probably best to rely on your outside counsel & auditors to monitor the big picture, but there is merit in keeping an eye on the comments your peer companies are receiving.  The blog also offers up some helpful tips for anyone – whether in-house or at a law firm – who is trying to monitor comment trends:

Know the Current Hot Topics –The SEC typically focuses many of its comments on several current hot button issues (e.g., financial measures not in accordance with generally accepted accounting practices, fair value measurements and estimates, loss contingencies, or segment reporting, among others).

Monitor Peer Comments –You can prepare for and preempt potential SEC comments before you file by knowing the current hot button issues. You can track and monitor the comments and responses of your industry peers or proactively consult with your audit firm or outside counsel for updates on emerging comment trends.

Monitor Broader Disclosure Trends – While its prudent to stay ahead of SEC comment trends to preempt easily addressed comments, don’t lose sight that many current disclosure trends are not driven by SEC rules or comments. Today’s SEC disclosure trends, like the current focus on ESG topics, arise from investor, proxy advisor or stakeholder initiatives with SEC rulemaking catching up later, if at all.

This is all good advice, but I’m particularly enthusiastic in my endorsement of the suggestion to monitor peer group comments. I’ve always been surprised at how relatively few companies seem to monitor the comments that their peers receive on a regular basis, but I’ve also never seen a lawyer who flagged a significant peer group comment trend in advance not end up being a hero to the entire corporate SEC reporting team.

John Jenkins