If a registrant agrees to make a disclosure change requested by its SEC staff reviewer, should the registrant’s response letter nevertheless include a disclaimer to the effect that the registrant does not (or does not necessarily) agree with the comment? A recent Ninth Circuit Court of Appeals opinion suggests that such a disclaimer of comment agreement may sometimes be advisable, notwithstanding any dissonance with the staff that the disclaimer may cause.
Singing a Different Tune to Different Listeners
In this Ninth Circuit case, the sellers of a security pursuant to SEC Regulation A accepted an SEC staff comment to delete some performance projections from the offering circular. However, the sellers continued to include the projections in other sales-related disclosures in connection with the offering. One dissatisfied purchaser in the offering filed a class action complaint alleging, among other things, that (1) the sellers’ use of these projections violated section 12(a)(2) of the Securities Act of 1933 because they constituted material misstatements and (2) the sellers’ failure to disclose the views that the SEC staff expressed in its comment about the projections also violated section 12(a)(2) because the staff’s views were necessary for the projections not to be materially misleading.
Courts in Ninth Circuit Eventually Get on Same Page
The lower court granted the sellers’ motion to dismiss the first of these counts, on grounds that the plaintiff did not adequately allege that the sellers knew the projection was false (and thus failed to meet section 12(a)(2)’s pleading requirements). Also, the lower court dismissed the second count on grounds that the staff’s comment letter was available to the plaintiff as a public document posted on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
As if playing from a different score, however, the Ninth Circuit reversed these dismissals, while emphasizing that, given the procedural posture of the case, it accepted as true the facts alleged by (and construed them in the light most favorable to) the plaintiff. This Ninth Circuit opinion, issued in June 2025, specifically noted that the SEC's request that the projections be removed from the offering circular had characterized the projections as “unsubstantiated.” The appeals court also pointed out that, although the sellers had argued with the reviewing staff about some of the staff’s comments, the sellers had not expressed to the reviewing staff any disagreement over the projections comment; and the court stated that this permitted an inference that the sellers were aware of the projections’ falsity. The Ninth Circuit’s opinion also rejected the argument that mere “constructive” knowledge by the plaintiff (such as via an EDGAR posting) would avoid liability for a material omission under section 12(a)(2).
What Does the Audience Need to Hear?
Despite these statements in the Ninth Circuit’s opinion, there may be relatively few instances where concern over potential legal exposure will make it advisable for a registrant to communicate a disclaimer of comment agreement (i.e., a statement that the registrant does not necessarily agree with a comment that the registrant nevertheless has decided to accept) to the SEC staff. Such a disclaimer generally would not serve much purpose unless the registrant, in any disclosure documents other than the one on which the staff commented, uses or continues to rely upon disclosures that materially deviate from the views expressed in the staff’s comment. Even in such cases, however, it may be doubtful whether a disclaimer of comment agreement will ultimately have much protective effect.
Rather, in most cases, registrants will be better served by simply not making (or continuing to rely upon) any disclosures that are inconsistent with a staff comment that the registrant has accepted, unless, after due consideration, the registrant concludes that it (1) has good reasons for doing so and (2) is comfortable that the noncompliant disclosure is not materially inaccurate or misleading and is unlikely to undermine the registrant’s reputation and relationships with the SEC staff. In this regard, registrants should be mindful that, depending on the circumstances, SEC staff members may review other disclosures that a registrant has made, in order to identify inconsistencies with a filing on which the staff is commenting.
The facts and considerations in particular cases will, like variations on a theme, lead to different conclusions about whether a disclaimer of comment agreement should be made and what form any disclaimer should take. Accordingly, registrants and their counsel will probably do best to avoid generalizations, while nevertheless remaining mindful of the potential implications of the Ninth Circuit’s approach for SEC staff comments that the registrant accepts.
