Revisions and Comments from the SEC & NASD

Once all the proper registration information has been completed and submitted to both the SEC and NASD there is only one thing a company can do: wait. The particular examiner at the SEC that received the filing will typically issue a comment on the filing shortly thereafter. This comment will typically include the SEC file number for the share registration. The NASD will also typically review the registration to ensure the affiliated broker-dealer/underwriter does not violate any underwriting compensation limits.

NASD reviews can take a long and unpredictable amount of time. Comment rounds can be issued in one to two month intervals and there is really no way to predict how long the process of registering your public shares may take. Comments from the SEC on a registration can vary depending on the deal. Even more established firms with extensive experience in submitting such requirements to the SEC will receive different quality and quantity of comments which may vary depending on the business and its financials.

Because the comments revolve around both financial and non-financial issues having direct access to accounting, finance and legal professionals throughout the review process to review and submit replies to SEC comments is important. Comments may request clarification or changes to submitted financial statements or potentially changes to the business description.

As long as there are not large issues brought on by the SEC which may require direct contact with the accompanying SEC examiner, most submitting companies will simply file an amendment to the SEC. Amendments to the comments will likely include individual and detailed responses to the single issues raised by the SEC. Once the amendment is filed with the corresponding responses, the SEC will iterate and provide yet another round of review and comments. Typically each round of comments will include far fewer comments than the previous round. The iterative process ceases once the reviewers run out of comments.

The SEC can purposefully (although probably not admittedly) delay a filing if they have any suspicion for specific players in the deal or if something isn’t feeling or looking quite right. After the completion of the SEC “back-and-forth” a share registration is deemed “effective.” An effective registration can be used to resell securities that were registered through the registration process.

When it comes to taking a company public, especially if you’re doing it from scratch, there are processes and procedures that must be followed. With a little patience and a lot of expertise, share registration can be completed painlessly—at least for the most part.

Understanding the Comment Letter Process in Depth

The SEC’s comment letter process is one of the most misunderstood aspects of going public. Many first-time issuers assume that a comment letter signals a fundamental problem with their registration. In reality, comment letters are standard procedure—virtually every registrant receives them, and the goal is clarification and completeness, not rejection.

Comments fall into two broad categories. Financial comments focus on the registrant’s compliance with GAAP, the adequacy of disclosures around revenue recognition, segment reporting, related-party transactions, and the reasonableness of accounting estimates. Non-financial comments address the clarity and accuracy of the business description, risk factor disclosure, management’s discussion and analysis (MD&A), and whether the company’s description of its business is sufficiently specific for investors to make an informed decision.

The quality of your initial responses matters enormously. A well-organized response letter—one that addresses each comment directly, with supporting references to the amended registration—tends to generate fewer follow-up comments in subsequent rounds. Companies that respond narrowly, or that provide partial answers, extend the process unnecessarily. Having experienced securities counsel manage the response drafting process is therefore not a luxury but a practical investment in timeline efficiency. This is why the compliance-aware workflow used by experienced deal teams coordinates legal, accounting, and management inputs before any response is filed.

NASD (FINRA) Review: What It Covers

Separately from the SEC review, the Financial Industry Regulatory Authority (FINRA)—successor to NASD for most regulatory purposes—reviews underwriting compensation arrangements in registered offerings. FINRA’s primary concern is whether the compensation paid to the managing underwriter and selling group members is “fair and reasonable” under its rules. This includes cash commissions, but also less obvious compensation: warrants, rights of first refusal on future offerings, fee arrangements, and consulting relationships.

FINRA comments typically take the form of a deficiency letter, and responses must be submitted through the FINRA Gateway. Unlike SEC comment rounds, FINRA reviews often resolve within one or two rounds—provided the initial filing clearly discloses all underwriting relationships and compensation. Obscuring or omitting compensation elements is a reliable path to a protracted FINRA review.

What “Effectiveness” Means—and What Comes After

When the SEC declares a registration “effective,” the company is cleared to proceed with the offering—but effectiveness is not the finish line. It is the starting gate for the actual capital raise. The underwriter will typically then launch a roadshow, during which management presents to institutional investors to build a book of orders. Pricing of the offering is negotiated with the underwriter based on investor demand observed during the roadshow.

For companies pursuing this path, understanding the full capital-raising sequence—from registration through pricing and closing—is essential context. Reviewing the capital raise preparation workflow provides a structured view of each stage. Companies that have previously raised institutional capital and are familiar with investor materials will find the roadshow phase more manageable; those coming to it cold can benefit from reviewing investor materials preparation resources well in advance.

For companies earlier in the process—still deciding whether a public offering is the right path—understanding how the SEC review process works is one input into a broader strategic analysis. Consulting with advisors experienced in the full range of capital markets alternatives is a logical starting point. If you are evaluating a public offering or other capital transaction, preparing a transaction brief is a practical way to begin that conversation.

Frequently Asked Questions

How many rounds of SEC comments should a registrant expect?

Most registrants experience two to four rounds of comments, with each subsequent round containing fewer items than the previous one. The process concludes when the SEC staff has no remaining comments—at which point the company requests that the registration be declared effective.

Can a registration be rejected outright by the SEC?

The SEC does not technically “approve” or “reject” registrations in the way a regulator might approve a license application. Instead, the SEC staff reviews for completeness and compliance with disclosure requirements. A company can withdraw its registration voluntarily, or the SEC can issue a stop order—but outright rejection of a properly completed filing is rare. Most issues are resolved through the comment and amendment process.

What happens if the SEC suspects fraud or serious disclosure violations?

If the SEC has serious concerns—suspected material misrepresentations, undisclosed related-party transactions, or indicators of fraudulent activity—it can refer the matter to its Division of Enforcement and can issue a stop order preventing the registration from becoming effective. These situations are relatively uncommon in legitimate offerings but underscore why accurate and complete initial disclosure is non-negotiable.

Does FINRA review every registered offering?

FINRA reviews offerings that involve a FINRA-member broker-dealer as underwriter or selling agent—which covers the vast majority of registered public offerings. Certain exemptions exist for offerings with no underwriting compensation, but in practice most issuers going public through a traditional underwritten offering will undergo FINRA review in parallel with the SEC process.