SEC Comment Letter Considerations, Including Industry Insights

The topics that constitute the current year’s top 10 list are largely consistent with the prior year’s list. However, the topics of debt, EPS, and signatures, exhibits, and agreements have joined the top 10 list, while the topics of income taxes (ranked 15th in the current year), internal control over financial reporting (ranked 11th in the current year), and fair value (ranked 13th in the current year) have dropped out of the top 10. The volume of reviews with a comment on MD&A as a percentage of all reviews with comment letters has continued to increase, whereas the volume of reviews with a comment on non-GAAP measures as a percentage of all reviews with comment letters decreased slightly. These two topics are still the two most significant sources of SEC comments by a wide margin since the SEC staff remains laser-focused on them. Given the SEC staff’s focus on ensuring that disclosures provide decision-useful information from management’s perspective, we expect the volume of comments on MD&A to remain high. While segment reporting remained in 3rd place, the volume of reviews with a comment on this topic increased from 16 percent of all reviews with comment letters to 23 percent of all such reviews, with the increase largely attributable to the staff’s comments on the implementation of the new disclosures required by ASU 2023-07, including significant segment expense disclosures. We also observed an increased number of comments related to signatures, exhibits, and agreements, which rose from 16th place in review year 2024 to 7th place in review year 2025 because of an increase in comments related to potentially missing or incorrect exhibits and certifications. In addition, both debt and EPS moved up into the top 10 list this year, indicating an increase in SEC comments related to the accounting for and disclosure of financial instruments.

A number of the aforementioned trends are likely to continue in years to come since comment letter topics have been largely consistent year over year. While it is difficult to predict what new comment letter trends are on the horizon, the SEC staff has historically focused on emerging issues such as macroeconomic issues as well as new accounting standards and regulations. Accordingly, we might expect a focus on AI and global trade issues as well as new income tax disclosures that go into effect this year. It remains to be seen how the recent change in SEC leadership and the corresponding changes in the SEC’s priorities will affect the Division’s filing reviews and resulting comment letters, if at all.

As the charts above illustrate, while there was a notable increase in the number of reviews with comment letters and the number of comment letters issued on Forms 10-K and 10-Q from the beginning of review year 2021 through the end of review year 2023, the trend started to reverse in review year 2024, with a decrease in (1) review year 2024 (8 percent year-over-year decrease in both the number of reviews with comment letters and the number of comment letters issued) and (2) review year 2025 (11 percent year-over-year decrease in the number of reviews with comment letters, 10 percent year-over-year decrease in the number of comment letters issued). This overall trend is most likely attributable to capital markets activity. Throughout calendar years 2020 and 2021, the volume of traditional initial public offerings (IPOs) and special-purpose acquisition company (SPAC) transactions reached record levels, with more than 800 companies going public during this time frame. During that period, SEC staff most likely focused on registration statements for IPOs and SPAC transactions and reduced discretionary reviews of annual reports. In 2022, the capital markets slowed, but the earlier activity led to an increase in the number of Forms 10-K filed by public companies, which are subject to recurring SEC staff review. With more public companies subject to review and lower levels of capital markets activity, we saw elevated levels of comment letters in review years 2023 and 2024, although the number of comment letters declined in review year 2024 from its peak in review year 2023. In review year 2025, we observed a more significant year-over-year decrease that is most likely attributable to increased capital markets activity as well as to ongoing changes to staffing levels at the SEC (similar to changes in staffing levels at other federal agencies). We believe that this reversal may continue into next year and that we may see further changes as the new director of the Division establishes the Division’s priorities for the disclosure review program.

Although the number of reviews with comment letters remains elevated, the vast majority of reviews conducted by the SEC staff do not result in a comment letter. For example, in the SEC’s fiscal year ended September 30, 2024, the SEC staff reviewed approximately 3,400 companies as part of the annual review process. However, only about a quarter of the reviews of those companies resulted in a comment letter.