Friday, October 07, 2016

‘Tandy’ text recedes from filing review process

By Mark S. Nelson, J.D.

The SEC’s Division of Corporation finance announced that companies responding to staff comment letters as part of the agency’s filing review process will no longer need to include the so-called “Tandy” language in their replies. Perhaps the inclusion in recent years of similar language in SEC-generated letters that often signal the end of a review dialog presaged the decision to let companies drop the representation from their replies. The Tandy update is effective now and even applies to companies that have yet to provide Tandy representations.

The Division announced it would publish filing review dialogs on EDGAR back in 2004, and in May 2005 it officially began to publicly release them. For much of this period, the staff requested that companies responding to comment letters provide the Tandy text. Some companies’ Tandy representations specifically mentioned the context of the review. A typical exchange looked like this:

SEC letter to company:
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that
  • the company is responsible for the adequacy and accuracy of the disclosure in the filings;
  • staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect to the filing; and
  • the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Company reply to SEC:
The adequacy and accuracy of the disclosure in the filing is the responsibility of the Company. The Company acknowledges that the staff comments or changes to the disclosure in the Schedule TO-I made in response to the staff comments do not foreclose the Commission from taking any action with respect to the Schedule TO-I. The Company acknowledges that it may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
But more recent SEC-generated review-ending letters began to include Tandy-like language to remind companies of their obligation to comply with federal securities laws. A typical SEC letter stated:
We have completed our review of your filing. We remind you that our comments or changes to disclosure in response to our comments do not foreclose the Commission from taking any action with respect to the company or the filing and the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Exchange Act of 1934 and all applicable rules require.
Previously, these letters would have simply stated that SEC staff had finished reviewing a company’s filings without saying more.

According to the Division’s latest announcement, SEC-generated letters to companies now will include a brief admonition:
We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the staff.

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