Individual Lawyers, the SEC Revolving Door, and Comment Letters
53 Pages Posted: 9 Jan 2018 Last revised: 5 Dec 2018
Date Written: December 3, 2018
Government officials, advocacy groups, and the business press have raised concerns that former SEC employees may continue to influence the SEC after leaving the agency. Using a hand-collected database of individual lawyers that represent firms in responding to SEC comment letters, we examine the impact of individual lawyers, and lawyers formerly employed by the SEC, on the comment letter process. We document significant differences between individual lawyers in their clients’ outcomes following the receipt of a comment letter, and find that firms that retain former SEC lawyers are larger, older, more profitable, and more likely to have received a comment letter raising accounting issues. After matching on lawyer and law firm characteristics, comment letter complexity and issues, and firm characteristics, we find evidence consistent with former SEC lawyers increasing resistance in the comment letter process: conversations involving former SEC lawyers involve more negotiation, are more likely to discuss revising future filings, and result in fewer amendments to prior periodic filings.
Keywords: SEC comment letters, external counsel, revolving door, regulatory capture
JEL Classification: G18, K22, M41, M48
Suggested Citation: Suggested Citation