Negative Assurance

A negative assurance letter, or a “10b-5 letter,” is a letter (not an opinion) delivered to the underwriters by the issuer’s and/or the underwriters’ or dealers’ counsel in connection with an offering of securities as to which underwriting liability may exist. The “10b-5 letter” references Rule 10b-5 under the Securities Exchange Act, the antifraud statute. Such a letter would state that, after reasonable investigation, nothing has come to counsel’s attention which leads them to believe that the offering materials provided to investors contain a material misstatement or omit to make a statement without which the offering materials would be materially misleading.

In the context of a comfort letter, negative assurance refers to a statement by the accountants that, as a result of their having performed certain identified procedures, nothing came to their attention which caused them to believe that specified matters do not meet a particular standard—for example, when commenting on the issuer’s unaudited interim financial statements, negative assurance may be provided that nothing came to the attention of the accountants that would cause them to believe that any material modifications ought to be made in order for such financial statements to be in conformity with generally accepted accounting principles.

Negative Assurance

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