Further, “keeping current” procedures are performed by the independent auditors to ascertain whether anything has occurred up to the effective date of the registration statement with respect to the company’s ﬁnancial position or operations that would have a material effect on the audited ﬁnancial statements included in the registration statement.
Due diligence also encompasses the reading of the entire registration statement by all parties involved in its preparation to ensure that there exist no material misstatements, omissions, or inconsistencies.
In addition, as part of their due-diligence procedures, underwriters request comfort letters from your independent auditors with respect to information that appears in the registration statement outside the ﬁnancial statements and on events subsequent to the accountants’ report date. It is common for underwriters to request comfort on as much information as possible. Generally, the more information the underwriters seek comfort on, the more expensive the process becomes. In light of this, and to avoid any misunderstandings and undue time delays, it is important that you, the auditors, and underwriters agree, in the early stages of the registration process, on the information on which the auditors will be giving comfort.
Generally, two comfort letters are issued to the underwriters, one at the time that the underwriting agreement is signed (generally the pricing date) and an updated letter at the closing date. After the registration statement is ﬁled, but before it becomes effective, the principal underwriter holds a due-diligence meeting. Thedue-diligence meeting is attended by the principal underwriter and often by members of the underwriting group, as well as by your company’s principal ofﬁcers, counsel for your company, counsel for the underwriter, and the independent accountants. At this meeting, the members of the underwriting group are afforded the opportunity to exercise due diligence as to the proposed offering in that they may ask any questions concerning the company and its business, products, competitive position, recent developments in ﬁnance, marketing, operations and other areas, and future prospects.
DAYS 61-90 – Filing the registration statement with the SEC
Pre-ﬁling conference with the SEC
Prior to ﬁling the initial registration statement with the SEC, some companies hold apre-ﬁling conference with the SEC. A pre-ﬁling conference is recommended whenever important accounting or business issues need to be resolved and those problems are of sufﬁcient magnitude to warrant the meeting. This conference is usually attended by the principal ﬁnancial ofﬁcer of the company, who should articulate the company’s position, together with representatives from the company’s independent accounting ﬁrm and, generally, outside counsel.
The primary advantage of holding such a conference is that it may speed up the review process as the company may avoid any last-minute delays.