(The article featured below is a selection from SEC Filings Insight, which is available to subscribers of that publication.)

Division of Corporation Finance Describes Filing Review Process

The Division of Corporation Finance has issued a document outlining its filing review process (http://www.sec.gov/divisions/corpfin/cffilingreview.htm). The Division focuses its resources on critical disclosures that appear to conflict with the SEC's rules, the applicable accounting standards or on areas in which the disclosure appears to be materially deficient or lacking in clarity. The company and those involved with the preparation of SEC filings are solely responsible for the accuracy of the disclosure. The staff does not evaluate the merits of a transaction.

The Division has 11 offices that review company filings, each with specialized expertise in a particular industry and its associated accounting and disclosure issues. The staff must review all reporting companies at least every three years under the Sarbanes-Oxley Act. Some companies are reviewed more frequently. Transactional filings such as public offerings, business combinations and proxy solicitations are selectively reviewed.

The Division first evaluates each company's disclosure in a preliminary review to determine whether a further review is needed. If a filing is selected for further review, the extent of the review may include a full cover-to-cover review of the entire filing, a financial statement review or a targeted issue review. The staff approaches the review from an investor's perspective and may issue a broad range of comments. Many reviews are completed without issuing any comments.

A second person reviews nearly all of the proposed comments in order to ensure consistency in the process. The Division sees the comment process as a dialogue with the company about its disclosure. It may request additional information or the addition or revision of certain information. In some instances, the staff will request that the company provide additional or different disclosure in a future filing with the SEC.

Companies typically respond to the staff comments in a letter. They may amend their filings where appropriate. A company's explanation about an issue will often resolve the matter. The staff sometimes issues additional comments following a company's response. The comment process continues until all comments are resolved. Once all of the issues are resolved, the Division provides a "no further comment" letter to confirm that the review process is complete.

A company may disagree with the outcome of the comment and response process and may seek reconsideration by other Division members. Staff members at all levels are available to discuss any disclosure and financial statement presentation matters. The Division encourages companies to seek reconsideration of a comment at any point during the filing review process if they disagree with the staff. The Division does not require a formal protocol for consulting with the staff or when seeking reconsideration of a staff comment.

The company should make sure that it understands the staff comment letter. The Division includes the name and telephone numbers of the staff members involved in the review. If the staff seeks a revision to a company's disclosure or its financial statements, the company may provide a written explanation of its reasoning. This step will often resolve the comment.

Reconsiderations of comments relating to legal or textual disclosure matters should be addressed with the legal branch chief in the assistant director's office, and then proceed to the assistant director. The matter may also be addressed with the associate director who oversees that office and ultimately with the deputy director or the director of the Division.

For reconsiderations of accounting or financial disclosure matters, the company should start with the accounting branch chief in the assistant director's office. The next level of reconsideration is with the senior assistant chief accountant of that office, followed by the associate chief accountant in the Division's Office of the Chief Accountant, and ultimately with the chief accountant.

The Commission's Office of the Chief Accountant may also be involved in any stage of the process. OCA generally addresses questions relating to the application of generally accepted accounting principles. The Division resolves matters relating to the age, form and content of financial statements that are required to be included in a filing. OCA has published its own set of procedures for consulting with its office. Those procedures are available at http://www.sec.gov/info/accountants/ocasubguidance.htm.