The process involves filing a registration statement—including a prospectus, financial statements, and other disclosures—followed by staff review, comment letters, amendments, and final approval. Once all regulatory requirements are satisfied and the company formally requests effectiveness, the SEC may declare the registration statement effective, allowing the company to proceed with its public offering.

Initial Staff Review

The SEC staff conducts an initial review of the registration statement to confirm compliance with disclosure and accounting requirements. The goal of the review is to ensure that the filing contains sufficient information for investors to make informed decisions.

Importantly, the SEC does not evaluate the merits of the transaction or determine whether the investment is appropriate for any particular investor.

The scope of review generally takes one of three forms:

• Full Review: A comprehensive examination of the entire filing for compliance with securities laws and disclosure standards.
• Financial Statement Review: A focused review of financial statements and related disclosures to ensure compliance with applicable accounting standards.
• Targeted Issue Review: A limited review focusing on specific disclosure issues or regulatory concerns.

Staff Comment Letter

After reviewing the filing, the SEC staff may issue a comment letter identifying deficiencies, questions, or areas where additional clarification is required.

Comment letters may request:

• Expanded disclosure to enhance investor understanding;
• Additional financial information;
• Clarification of statements that could potentially be misleading;
• Supplemental information that assists the staff in evaluating the filing.

Company Response to Comments

The company must respond to each staff comment, typically through a written response letter submitted alongside amendments to the registration statement.

Companies may address comments by:

• Providing additional explanations or analysis;
• Revising disclosure language within the filing;
• Supplying supplemental information requested by the staff.

If the company does not fully understand a comment, it may seek clarification from the reviewing examiner before responding.

Certain technical accounting issues may also be addressed with the SEC’s Office of the Chief Accountant, while disclosure issues are typically handled by the reviewing division.

Iterative Review Process

The SEC staff reviews the amended filing and the company’s responses. Depending on the adequacy of the revisions, the staff may issue additional comment letters requesting further clarification.

This iterative process—involving comments, responses, and amendments—continues until both the SEC staff and the company agree that the registration statement satisfies regulatory requirements.

Request for Effectiveness

Once all comments have been resolved, the company may formally request that the SEC declare the registration statement effective. This request signals that the company believes the filing is complete and compliant with applicable disclosure rules.

Declaration of Effectiveness

If the SEC staff determines that the filing satisfies all requirements, the Commission will declare the registration statement effective. The SEC confirms this determination through a formal notice and records the effectiveness on the EDGAR system.

Once the registration statement becomes effective, the company may legally proceed with its public offering of securities.

Legal Guidance During the SEC Review Process

Preparing and navigating a registration statement review requires careful coordination among legal counsel, accountants, and company management. Errors or incomplete disclosures can significantly delay the process or trigger additional regulatory scrutiny.

The attorneys at Corporate Securities Legal LLP assist companies throughout every stage of the public offering process—from preparing registration statements to responding to SEC comment letters and securing the final declaration of effectiveness.

Contact Corporate Securities Legal LLP to learn how experienced securities counsel can guide your company through the SEC registration review process and help ensure a successful public offering.

Forward-looking statements are designed to address that final element: how management expects the company to perform going forward. While these statements can provide valuable insight into a company’s strategic vision, they also carry legal risk if not prepared carefully and in compliance with federal securities laws.

What Is a Forward-Looking Statement?

A forward-looking statement is a management prediction or projection regarding the future performance of a business. These statements are typically included in SEC registration materials and other public disclosures and may address a wide range of anticipated outcomes.

Common categories of forward-looking statements include:

• Financial performance
  Forecasts of revenue, losses, earnings per share, dividends, operating expenses, capital expenditures, and retained earnings.
• Operational plans
  Planned business development initiatives, mergers or acquisitions, capital investments, and anticipated product lines or services.
• Risk factors
  External conditions that could impact performance, such as economic trends, regulatory changes, or competitive pressures.
• Management assumptions
  The underlying assumptions and reasoning that support the company’s projections and strategic direction.
• Independent review
  Reports or analyses from outside reviewers that lend credibility to the reasonableness of management’s projections.
• Legal disclaimers
  Statements clarifying that projections are inherently speculative and not guarantees of future performance. The SEC requires such disclaimers in published management materials to prevent investors from treating projections as assurances.

Legal Protections for Management

To balance investor protection with the need for companies to communicate future plans, Congress enacted the Private Securities Litigation Reform Act of 1995 (PSLRA). The PSLRA provides a “safe harbor” that protects corporate officers and directors from unwarranted securities fraud claims based solely on forward-looking statements, provided those statements meet statutory requirements.

Under U.S. Supreme Court interpretations of the PSLRA, an investor bringing a claim based on a forward-looking statement must prove:

• A material misrepresentation or omission meeting the legal definition of fraud;
• Direct reliance on that misrepresentation when deciding to buy or sell a security; and
• A resulting financial loss caused by the transaction.

Absent these elements, claims based on forward-looking statements are unlikely to succeed.

Procedural Requirements Under the PSLRA

The PSLRA also introduced procedural safeguards designed to curb frivolous shareholder lawsuits and abusive litigation practices. These safeguards include:

• Stricter pleading standards – Allegations of negligence are insufficient. Plaintiffs must plead facts creating a “strong inference” of fraudulent intent.
• Lead plaintiff requirements – Class actions must be led by the shareholder with the largest financial interest in the claim, not random or nominal investors.
• Automatic stay of discovery – Discovery is paused while motions to dismiss are pending, preventing plaintiffs from engaging in costly fishing expeditions.
• Limits on damages and attorneys’ fees – Recovery is limited to actual losses, and caps are placed on permissible attorneys’ fees.
• Auditor obligations – Auditors must report illegal acts to management and, if necessary, to the SEC.
• Proportional liability – Defendants are liable only for their share of the harm, rather than being jointly responsible for the entire damage award.

Why Proper Drafting Matters

To qualify for PSLRA safe harbor protection, forward-looking statements must meet specific statutory and regulatory requirements. Poorly drafted projections, missing disclaimers, or unsupported assumptions can expose a company and its leadership to unnecessary legal risk and SEC scrutiny.

Need Guidance on Forward-Looking Statements?

The attorneys at Corporate Securities Legal LLP have extensive experience preparing compliant forward-looking statements and full SEC registration filings. Our team understands how to balance meaningful disclosure with legal protection, helping companies avoid delays, revisions, and enforcement exposure.

Contact us to ensure your forward-looking statements meet SEC requirements, qualify for PSLRA safe harbor protection, and move smoothly through the registration process.

A mandatory arbitration provision requires investors to arbitrate claims arising under the federal securities laws with the issuer of the securities, rather than pursuing those claims in federal court. In the context of an SEC registration statement, this is commonly referred to as an issuer-investor mandatory arbitration provision.

According to Paul S. Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC):

“A mandatory arbitration provision requires an investor to arbitrate its claims arising under the federal securities laws with the issuer of the securities.”

Mandatory arbitration provisions offer an alternative forum for resolving disputes and have long raised questions regarding enforceability and investor protections under federal securities laws.

Is Arbitration a Satisfactory Alternative to Federal Court Litigation?

The Federal Arbitration Act of 1925 (“FAA”) established a strong federal policy favoring arbitration agreements. Section 2 of the FAA, its principal substantive provision, states in relevant part:

“A written provision in a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction shall be valid, irrevocable, and enforceable.”

Whether the FAA applies to issuer-investor mandatory arbitration provisions depends initially on whether there is a valid and enforceable written agreement to arbitrate between the parties.

Do Federal Securities Laws Override the FAA?

Chairman Atkins has explained that issuer-investor mandatory arbitration provisions have historically been viewed as potentially inconsistent with federal securities statutes in at least two ways:

They may violate the anti-waiver provisions of federal securities laws by foreclosing a judicial forum; and
They may impede investors’ ability to bring private actions—particularly class actions—to enforce their rights under federal securities laws.

Anti-Waiver Provisions Under Federal Securities Laws

Section 14 of the Securities Act of 1933 and Section 29(a) of the Securities Exchange Act of 1934 contain anti-waiver provisions that invalidate contractual clauses which:

•Require investors to waive compliance with federal securities laws; or
•Eliminate substantive investor protections, including remedies for fraud.

Supreme Court Resolution of Arbitration and Anti-Waiver Conflicts

In a series of decisions issued in the late 1980s, the U.S. Supreme Court clarified the relationship between arbitration agreements and federal securities laws. The Court held that:

1. Anti-waiver provisions prohibit waivers of substantive obligations, not procedural or jurisdictional provisions;
2. The arbitration process does not inherently undermine substantive rights granted under the Securities Act; and
3. To override the FAA, Congress must express a “clear and manifest” intention to do so in subsequent legislation.

These rulings significantly strengthened the enforceability of arbitration agreements in securities-related disputes.

New SEC Policy Statement

On September 17, 2025, the SEC issued a policy statement titled Acceleration of Effectiveness of Registration Statements of Issuers with Certain Mandatory Arbitration Provisions.

In announcing the policy change, Chairman Atkins stated:

“The Commission has determined that the presence of an issuer-investor mandatory arbitration provision will not impact decisions regarding whether to accelerate the effectiveness of a registration statement.”

This policy marks a significant shift, making clear that mandatory arbitration provisions will no longer impede SEC approval or acceleration of registration statements.

Need Legal Guidance on Mandatory Arbitration Provisions?

The attorneys at Corporate Securities Legal LLP advise companies on the advantages and risks associated with mandatory arbitration provisions, registration statement disclosures, and all aspects of the IPO process.

Our team is prepared to help you evaluate strategic considerations, comply with SEC requirements, and structure registration statements for a successful public offering.

Public companies are required under U.S. Securities and Exchange Commission (SEC) rules to periodically provide transparent disclosures to investors and the public regarding executive compensation, partcularly when compensation is tied to equity awards such as stock and stock options. These requirements are collectively referred to as equity plan disclosure rules.

Equity plan disclosures include:

• Grant policies
• Pay versus performance policies
• Clawback policies
• Insider trading and ownership disclosures

SEC Requirements for Pay Versus Performance Disclosures

The SEC provides highly specific instructions governing how pay versus performance information must be presented. Public companies are required to include detailed tables that compare executive compensation against company performance metrics.

These tables must clearly disclose:

• The compensation of the Chief Executive Officer (CEO);
• The average compensation of other Named Executive Officers (NEOs); and
• The company’s financial performance, often tied to equity-based awards.

The purpose of these disclosures is to allow investors to evaluate whether executive compensation aligns with company performance.

Mandatory and Company-Selected Performance Measures

Under SEC rules adopted in 2022 pursuant to the Dodd-Frank Act, public companies must disclose specific performance measures in their proxy statements to illustrate the relationship between executive pay and performance.

Mandatory measures include:

• Total Shareholder Return (TSR); and
• Net income.

In addition, companies must identify and disclose Company-Selected Measures (CSMs)—the financial performance measures the company believes are most important in linking executive compensation to performance.

Common CSMs include:

• Earnings before interest, taxes, depreciation, and amortization (EBITDA);
• Earnings per share (EPS); and
• Revenue or sales.

TSR measures the return generated for shareholders through stock price appreciation and dividends over a specified period and must be compared to a selected peer group. Net income reflects the company’s profitability after all expenses and taxes.

Uniform Formatting and Disclosure Obligations

The SEC requires pay versus performance disclosures to be presented in a uniform and standardized format to ensure comparability across public companies. Failure to comply with the prescribed format constitutes a violation of SEC reporting requirements. Ignorance of the rules is not a defense.

The SEC’s detailed disclosure instructions include the following requirements:

1. Footnotes to the table. Registrants must disclose specified information in footnotes, including the name of each Principal Executive Officer (PEO) and each non-PEO NEO included in the average compensation amounts, as well as amounts deducted or added to calculate executive compensation actually paid.
2. Relationship disclosure. Item 402(v) requires registrants to describe the relationships between each financial performance measure and the executive compensation actually paid to the PEO and, on average, to other NEOs over the five most recently completed fiscal years (or three years for Smaller Reporting Companies). Registrants other than SRCs must also describe the relationship between company TSR and peer group TSR. These disclosures may be presented in narrative, graphical, or combined formats.
3. Tabular List. Registrants other than SRCs must provide a list of three to seven financial performance measures they determine are the most important measures used to link executive compensation to performance. Non-financial measures may be included if they are among the company’s most important metrics.
4. Inline XBRL. All registrants are required to use Inline XBRL to tag pay versus performance disclosures in proxy or information statements. Each value in the pay versus performance table must be separately tagged, with block-text tagging required for footnotes, relationship disclosures, and the Tabular List where applicable.

Why This Matters for Public Companies

Pay versus performance disclosures are a frequent focus of SEC review and investor scrutiny. Errors, omissions, or deviations from the required format can result in regulatory comments, amended filings, enforcement actions, and reputational harm.

Careful coordination between legal, finance, compensation, and reporting teams is essential to ensure compliance and minimize regulatory risk.

Need Legal Guidance on Pay Versus Performance Compliance?

The securities attorneys at Corporate Securities Legal LLP advise public companies on executive compensation disclosures, proxy statement compliance, equity plan reporting, and SEC regulatory strategy.

Our team can help ensure your Pay Versus Performance Executive Compensation disclosures fully comply with SEC requirements—so you can avoid regulatory exposure and the uncertainty of how the SEC may respond.

By Christopher A. Wilson

Until January 31, 2019, Regulation A+ (“Reg. A”) was not available to reporting companies under the Securities and Exchange Act of 1932. However, in 2018 Congress mandated that the Securities and Exchange Commission (“SEC”) make reporting companies eligible to use Reg. A.

The SEC has issued final rule amendments (Amendments) permitting companies reporting under Section 13 or 15(d) of the 1934 Act to offer securities pursuant to the registration exemption Reg. A. See Securities Act Release 33-10591 (Dec. 19, 2018). Previously, offerings pursuant to Regulation A were expressly limited to non-reporting companies. The Amendments also provide that, so long as the reporting company is current in its 1934 Act periodic reports, the reporting company has no additional periodic reporting obligations under Regulation A. The Amendments became effective on Jan. 31, 2019. Regulation A+ is the informal name given to the amended SEC rules that expanded the Regulation A offering exemption.

The SEC’s final rules just recently became effective, and Reg. A now is one of the most attractive methods for reporting companies to sell securities, particularly the companies whose stock is listed on the OTC Markets, such as the PinkOTC Market, OTCQB, and OTCQX exchanges. In 2017, there were 267 registered offerings valued under $50 million by companies whose securities were not listed on national exchanges (i.e., in the OTC Marketplaces). These offerings would now be eligible to use Reg. A. For such non-exchange listed companies, the advantages of Reg. A include the following:

• Tier 2 offerings (up to $50 million in aggregate sales) are exempt from “blue sky” filing requirements. Thus, Reg. A is much more attractive for OTC-listed companies as opposed to a traditional registered public offering which does not preempt compliance with such blue sky laws.

• Lower legal costs and compliance expenses. Additionally, Reg. A offerings are not subject to liability under Section 11 of the Securities Act, reducing the legal risk associated with the offering.

• Investors in Reg. A offerings receive free-trading securities.

• Reg. A offerings are not integrated with prior offers and sales of securities, or with subsequent sales of securities in registered sales. This affords OTC companies with greater flexibility to choose between Reg. A offerings and registered offerings.

• An issuer may “test the waters” by soliciting interest from investors, including individuals, without filing test-the-waters materials with the SEC. In registered offering, emerging growth companies may solicit investor interest but only from qualified institutional buyer and institutional accredited investors after filing the solicitation materials with the SEC.

• Reg. A permits sales by selling shareholders (up to $6 million in Tier 1 offerings and $15 million in Tier 2 offerings, but not more than 30% of the offering in the first Reg. A offering).

• A reporting company automatically complies with the reporting requirements of Reg. A by filing its quarterly and annual reports.

• The age requirement of the financial statements is more lenient than that of a registered offering.

The review process for Reg. A offerings appears much less stringent. Reg. A offerings typically receive fewer comments and issuers generally report that the process is quicker than that of a registered offering.

Reg. A does have a number of restrictions that may still limit its usefulness. Reg. A offerings cannot be “at-the-market,” so the sales price must be a fixed price which is determined at the time of the offering circular’s qualification. This restriction makes continuous offerings less attractive because the issuer may not adjust the offering price to reflect business developments. Also, sales of Tier 2 securities may only be made to accredited investors, otherwise the purchase price of the securities may not exceed 10% of the greater of an individual investor’s net worth or annual income (revenue or net assets for entity investors).

Notwithstanding these restrictions, hundreds of OTC-listed companies that conducted registered public offerings last year may find that Reg. A presents a less costly and more attractive way to raise capital.

Spotify, however, chose to go the route of a direct public offering, a process typically used by small companies who cannot afford the high cost of an IPO. Under that process the company sells its own existing shares and eliminates the services of the banks. There is no dilution of the value of the shares, because no new shares are issued. It is a shorter process and less expensive.

However, without the assurances of the banks to maintain a steady price of the shares, a direct public offering runs the risk of a discount in the price of the shares, which can be caused by heavy trading. Spotify, though, can reduce that risk by approaching existing investors and negotiating lock-up periods, to restrict the supply of shares on the market. According to the Wall Street Journal, Spotify “is expected to use private market trading to guide investors towards a public market stock price.”

The question arises as to why Spotify chose the direct public offering. The company’s cash flow is positive and it has unlimited access to capital, with a worldwide brand and 70 million subscription users. The company was valued at $19 billion last December. Also, the company is known and understood worldwide, to it did not need the help of bankers to convince investors of its value. Spotify said it chose the direct public offering route because it can “list without selling shares”, it “offers liquidity to shareholders, and would provide equal access to buyers and sellers. It also wanted the process to be transparent and allow the market to set the price of the shares.”

With all that said, the bottom line is still that the a direct public offering is always less expensive than the traditional route of an IPO.

According to a NYSE spokesman, Spotify will be the “very first NYSE direct listing” of a foreign company. It is unlikely that many other companies will go the same route as Spotify, because they don’t have all the same unique attributes. However, there is speculation that maybe the market, which has hasn’t seen many changes in a long time, is ready for some kind of disruption. More direct public offerings could be what’s next.

The law firm of Bradshaw, Wilson & Cao, LLP routinely assists companies who are going public via direct registration, like Spotify, or using traditional underwriters. Call us at (949) 752-1100 or email gil@securitieslegal.com if you have any questions or want to schedule a free consultation about an initial public offering.