Long SEC Reviews Quarterly Update # 1

Long SEC reviews could signal hard to resolve issues and predict material changes in disclosure or accounting

What are unresolved SEC comments, and why are they important?

SEC comment letters refer to issues or concerns the U.S. Securities and Exchange Commission raised during the regulatory review of publicly traded companies' financial reports, particularly in their 10-K filings. The reviews are routine and aim to enhance transparency, accuracy, and compliance in these companies' accounting and disclosure practices.

When the SEC identifies deficiencies or unclear aspects in a company's financial reports, it issues comment letters to request clarification or corrections. Companies are expected to address these comments promptly within ten business days of receiving the comments. The number of comments received and the time taken to address them (duration) are often used as metrics in academic literature to evaluate the significance of concerns raised by the SEC (Cunnigham and Leidner, 2022). While SEC c…