Responding to Staff Comments Most comment letters request that the recipient reply with a written response to the comments therein within 10 business days. If the company believes it needs more time to respond to the Staff’s comments, the company should contact the Staff to request additional time as soon as possible or seek clarification on any of the comments. Key considerations and best practices for drafting a response letter include: ■ Assess the nature of the comment(s) and allocate responsibility to address each comment. In some cases, it may be necessary or advisable to seek input from outside legal counsel and auditors. ■ Prepare a shell response letter as soon as possible. The shell response should include an introductory paragraph explaining that the correspondence is being submitted in response to a comment letter received by the company regarding the applicable filing (or, if applicable, that the company is responding to an oral comment) as well as a reproduction of each of the Staff’s comments, each of which would be followed by a space for the company’s responses. This will ensure that you clearly and directly address every comment issued. Receiving Staff Comments Most commonly, the Staff provides a company with comments where it believes a company has not complied with the SEC’s rule requirements, should enhance its disclosures and/or can provide additional information. There are generally three types of comments issued: ■ Substantive comments requesting revisions to the disclosure to provide clarity with regard to language that is ambiguous or that is inconsistent with other disclosure included or incorporated by reference in the filing; ■ Comments requesting supplemental information to assist the Staff in assessing the company’s disclosure; and ■ Comments regarding technical or procedural deficiencies, such as the inclusion of certain required exhibits and the appropriateness of adjustments to non-GAAP measures. Generally, comments are provided to the company in the form of a written comment letter. In certain circumstances, the Staff may provide oral comments in addition to (and occasionally in lieu of) a written comment letter. If a company receives oral comments, the company should ask the Staff examiner how he or she would like to receive the company’s response. Best practice is to respond to oral comments with a written letter to document formally the oral comment that was conveyed and the company’s response. It is possible that Staff review may involve multiple rounds of comments and responses. When all issues relating to a review are resolved to the Staff’s satisfaction, the SEC advises the company by letter, often preceded by a phone call from the Staff examiner, that it has no further comments, and that the Staff’s review is complete. All comment letters and related responses are posted to SEC’s EDGAR website approximately 20 business days after the review has been completed. However, a company can request confidential treatment of portions of its response letters. If this request is granted, only the non-confidential portions of a response letter are made publicly available. PRACTICE NOTE: The best way to avoid drawing comments is to be prepared. Registrants should understand the regulations and keep apprised of developments in SEC rules and disclosure practice. For instance, COVID-19, inflation and the war in Ukraine have all resulted in the Staff pushing for enhanced disclosures. Due to the global implications of such topics, the SEC’s focus was, frankly, predictable and understandable. Being prepared also means reviewing relevant comment letters and responses—as well as any disclosure changes that resulted from the comment letters—to discern what topics are of particular interest to the SEC and how the comments ultimately were resolved, all of which should inform the company’s disclosures in periodic reports and registration statements, as applicable. 3 | A Comparative Analysis of 2022 and 2023 SEC Comments Issued to REITs
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