Division Of Corporation Finance

The Division of Corporation Finance is a branch of the U.S. Securities and Exchange Commission (SEC) that has oversight of disclosure practices of registered firms that offer securities to the public. The division is responsible for ensuring that publicly-traded firms provide the required level of disclosure of material information to investors so that they can make informed investment decisions. The division reviews required documents issued to investors, including Form 10-Ks, Form 10-Qs, proxy materials and other ongoing filings. The unit also provides interpretive assistance to companies regarding SEC rules and forms and makes recommendations to the SEC on ways to enhance the agency's effectiveness for public investors. There are presently 11 offices of the division spread around the country, each with 25 to 35 professionals with specialized industry and accounting expertise.

The Division of Corporation Finance acts like a watchdog over filings made under the Securities Act of 1933 and Securities Exchange Act of 1934. There are thousands of filings over the course of a year, but limited human resources, so the division "selectively" reviews filings to check for compliance to disclosure and accounting rules. (However, the Sarbanes-Oxley Act of 2002 calls for "some level of review" of each reporting company at least once every three years.) The group does not publicly disclose the criteria used to select filings for review in order to protect the integrity of the process.

When it is determined that there exists deficiency or lack of clarity in filings, the staff will take the necessary steps to compel a company to satisfy requirements. Known as a comment process, the oversight action by the division allows the company some time to respond to the comments made by the division with respect to disclosures in a filing. The result is typically revisions to financial statements or amendments to disclosures to make them clear and more useful for investors. However, it should be noted that the overall review process is "not a guarantee that the disclosure is complete and accurate," according to the division. That responsibility always rests with the company providing the filing.