SAS 72 comfort letters in international securities offerings for non-US lawyers
Produced in partnership with Peter Kohl of Hogan Lovells International LLP
SAS 72 comfort letters in international securities offerings for non-US lawyers

The following Corporate guidance note Produced in partnership with Peter Kohl of Hogan Lovells International LLP provides comprehensive and up to date legal information covering:

  • SAS 72 comfort letters in international securities offerings for non-US lawyers
  • Comfort letters and the 'due diligence' defence
  • Engagement of accountants and addressees of comfort letters
  • Periods covered and levels of comfort
  • Ticks and ties
  • 135-day rule
  • Dates when comfort letters are given
  • Other accounting due diligence

The underwriters or initial purchasers in an international securities offering will customarily require that the issuer's accountants provide one or more comfort letters relating to financial information contained in the prospectus or offering memorandum relating to the offering. Comfort letters are an important part of the underwriters' due diligence review and defence from potential liability under US securities law.

Comfort letters are often referred to as SAS 72 letters, which relates to the Statement on Auditing Standards 72 (SAS 72) on which they are based. The Statement on Auditing Standards 72 has now been superseded by AU Section 634, Letters for Underwriters and Certain Other Requesting Parties (AU 634).

Comfort letters and the 'due diligence' defence

The basis for potential liability under US securities laws differs depending on whether the offering is publicly offered in the US, ie registered with the Securities and Exchange Commission (SEC), or privately offered to US investors, eg in an institutional placement in accordance with Rule 144A under the US Securities Act of 1933 (Securities Act).

Section 11 of the Securities Act establishes a private right of action against issuers, controlling persons, selling shareholders and underwriters involved in a public offering if the registration statement relating to the offering contains:

'an untrue statement of a material fact'

or omits:

'to state a material fact required to