We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Letter of Comment?

Mary McMahon
By
Updated: May 17, 2024
Views: 13,025
Share

A letter of comment is a notice from the Securities and Exchange Commission (SEC) advising a company planning a new offering that it may want to make certain changes to its registration statement. Registration statements are legal filings provided to the SEC to give it information about a company, including how it is organized and how many shares are being made available in the new offering. The letter of comment is not an indicator of wrongdoing, but is merely a request for additional clarity to avoid potential confusions and conflicts.

In the letter of comment, the SEC will outline its concerns about the registration statement and make recommended changes. The company can respond by filing those changes, thus resolving the matter before the public offering is made. If the company does not agree with the SEC's recommendations, it can discuss the issue with representatives and work out a mutually agreeable solution.

While receiving a letter of comment may seem ominous, as it suggests there is a problem with the registration statement, that problem may not be serious in nature. Sending such letters is not an indicator that the SEC thinks a company is engaging in fraud or any other wrongdoing, and the letter is not a formal warning. The purpose of the letter of comment is to make sure the registration statement is scrupulously accurate in the interests of protecting investors and the public.

Inaccuracies in a registration statement can include a variety of things, and they are often innocent in nature. The SEC, as the regulatory agency overseeing offerings of securities, wants to make sure that information associated with such offerings is transparent, correct, and sufficiently detailed. If information appears unclear or inaccurate, as might happen for example if an old address was left in by mistake, the letter of comment identifies it and provides an opportunity to correct it.

The SEC is responsible for carefully combing through all legal filings it collects to identify anything of concern. Companies can run into trouble if they fail to follow filing directions exactly or if they accidentally skip steps or elide information. When a letter of comment is received, the company is expected to review it, acknowledge the contents, and work on addressing the issue that drew the attention of an SEC analyst. If the letter appears to be erroneous in nature, identifying a problem that doesn't exist, company representatives can provide supporting documentation to resolve the situation.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Editors' Picks

Discussion Comments
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
Share
https://www.wisegeek.net/what-is-a-letter-of-comment.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.