The staff of the Securities and Exchange Commission’s Division of Corporation Finance has posted guidance for smaller reporting companies preparing registration statements. The staff has compiled a list of common comments made in connection with its reviews of initial registration statements under the Securities Act of 1933.

The report, posted to the SEC Website March 4, comes with the usual caveat: Each company should consider its own facts and circumstances when preparing its registration statement and related disclosure. The observations are not a substitute for the rules. Only the rules themselves can provide complete and definitive information regarding the requirements.

Among other things, the staff says it issues frequent reminders to companies to present their cover page disclosure in plain English, limit that information to what’s required by the disclosure items, and to present in their prospectus balanced summaries of the positive and negative aspects of their businesses and offerings.

With respect to the required disclosure on risk factors, an area with “a substantial volume of comments,” the staff suggests companies clearly and concisely identify a risk in each risk factor sub-heading; limit each risk sub-heading to one risk; set out the extent of each risk plainly and directly, and generally avoid mitigating language in risk factor discussions, such as clauses that begin with “while,” “although,” or “however.” The staff also notes that companies whose auditor expressed substantial doubt as to their ability to continue as a going concern should highlight that fact in the risk factor section.

Regarding use of proceeds, where a company will make its offering on a best efforts basis, the staff suggests that a company pick benchmarks for the amount of securities that it may sell, for example, 25 percent, 50 percent, 75 percent, and 100 percent, and indicate how it will allocate the proceeds at each benchmark.

The guidance also sets out several common comments related to Management’s Discussion & Analysis to help companies know where to focus. Among other things, the staff suggests companies could improve their MD&A presentation with an introduction or overview that provides a balanced executive-level discussion of the most important matters management is concerned with in evaluating the company’s financial condition and operating results. The staff also offers several ideas of what companies might include in that introduction or overview.

Other topics addressed include results of operations; information relating to the identity and experience of directors, officers, and certain significant employees; transactions with related persons, promoters, and certain control persons; plan of distribution; selling security holders; age of financial statements; statement of cash flows; revenue recognition; and the independent accountants’ report.