Former SEC Chair Cohen Explains Genesis of Staff Comment Letters

The SEC staff comment letters on corporate filings, which are now publicly available, are an example of the Commission’s flexible approach to regulation and its willingness to develop informal working procedures. This was explained by former Chairman Manual Cohen at a PLI seminar in NYC in 1964.

According to Chairman Cohen, the genesis of the comment letter is that the statute set up no procedure for the processing of registration statements. It seemed to offer only a choice between automatic effectiveness upon the lapse or acceleration) of the statutory period or the institution of formal proceedings looking to a stop order banning the sale of the securities involved. If, in those cases where revision of the registration statement seemed required, resort could only be had to formal proceedings, serious delays would be caused and securities flotation would otherwise be hampered.

Since this appeared to be contrary to the Congressional intent, and since the staff was, in any event, required to review the registration statement as a basis for Commission action, an informal procedure was devised which would make available to registrants the benefit of the staff review and permit appropriate revision or modification without formal proceedings.

Over time, the letter of comment technique was adapted to the additional duties undertaken as administration of new statutes was delegated to the Commission. It is now also employed in connection with analysis of registration statements and reports under the Securities Exchange Act of 1934, as well as the processing of documents filed pursuant to the Investment Company Act.