International Finance and Accounting Handbook

(avery) #1

It should be noted that the SEC’s full disclosure requirements apply principally to
public offerings. The Commission cannot directly influence disclosures made to po-
tential investors in private offerings to sophisticated investors, which are not subject
to the SEC registration process. It is noticeable, however, that disclosure practices in
private placements made pursuant to Rule 144A, discussed in section 14.5(b)(ii), are
heavily influenced by disclosure practices in the U.S. public markets.


(a) Division of Corporation Finance. When a public offering is made in the United
States, the issuer of the securities generally is required under the Securities Act of
1933 (the Securities Act) to file a registration statement with the SEC. This comprises
the prospectus or offering circular and other documents regarding the issuer or the of-
fering, such as important contracts, the underwriting agreement, and indentures relat-
ing to the securities offered, which are not part of the prospectus but which are re-
quired to be provided to the SEC as exhibits. The entire registration statement,
including exhibits, is available for public inspection. Each registration statement is
subject to review by both attorneys and accountants in the Division of Corporation
Finance. Nearly half of the division’s review staff is made up of accountants. The re-
viewers note any deficiencies and request further information, clarification, or amend-
ment to the registration statement by means of “comment letters” to the issuer or its
counsel. When the staff is satisfied that all material disclosure has been made, the reg-
istration statement is “declared effective” and the securities described in it can be sold
(offers, but not sales, may be made as soon as the registration statement is filed).
The staff of the division also reviews, in a similar way, the periodic disclosure doc-
uments required by the Securities Exchange Act of 1934 (the Exchange Act) of all is-
suers that have securities listed on a U.S. securities exchange, that have made a re-
cent public offering, or that have a certain number of shareholders. The Division of
Corporation Finance additionally reviews proxy solicitations, trust indentures relat-
ing to publicly offered debt securities, and the conduct of tender offers (including the
disclosure made in such offers and the substantive rights granted to offerees).
Within the division, the Office of International Corporate Finance deals with is-
sues that arise in connection with offerings by foreign issuers in the United States and
offerings made outside the United States by issuers with links to the jurisdiction. It
is this office together with the division’s chief accountant, and head of accounting op-
erations, that is principally involved when accommodations must be made to permit
foreign issuers to make offerings in the United States or to permit multinational of-
ferings to take place without undue interference by the SEC. Accommodations to for-
eign issuers may be made either through formal rules adopted by the Commission or
on a case-by-case basis through informal waivers or “no-action letters” (in which the
SEC staff, without expressing a legal conclusion, agrees not to recommend enforce-
ment action if an offering is conducted in a specified way).
Where accommodations to foreign issuers involve accounting issues, the chief ac-
countant of the Division of Corporation Finance will also become involved. Despite
the similarity of names, this individual is different from the Commission’s chief ac-
countant or any staff in the Office of the Chief Accountant. The division’s chief ac-
countant is concerned with implementation of the policies developed by the Office of
the Chief Accountant.


(b) Office of the Chief Accountant. The Office of the Chief Accountant is concerned
more with the development of accounting policy than with its application to specific


14.2 FUNCTION AND ORGANIZATION 14 • 3
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