Yesterday, the SEC proposed major changes to reduce complexity in the public company filer framework – which currently includes overlapping categories like large accelerated filers, accelerated filers, smaller reporting companies and emerging growth companies – in an effort to encourage companies to remain public by streamlining the filer status categories and extending scaled disclosure opportunities to more companies. Here’s the 318-page proposing release – and here’s the fact sheet (and a SEC Chair Atkins statement). There is a 60-day comment period.
Here are six things to know:
1. Most Companies Would Get Expanded Disclosure Relief: The proposal would extend many existing accommodations currently reserved for smaller reporting companies and emerging growth companies to nearly all non-accelerated filers. These include:
- Reduced executive compensation disclosures
- No pay-versus-performance disclosure
- No say-on-pay or say-when-on-pay votes
- Fewer years of audited financial statements required
2. Big Increase to Large Accelerated Filer Threshold: The SEC proposes raising the large accelerated filer public float threshold from $700 million to $2 billion. Companies would also need:
- Two consecutive years above the threshold
- At least 60 months as a reporting company before qualifying
3. Accelerated Filer and SRC Categories Would Disappear: The proposal would eliminate the “accelerated filer” and “smaller reporting company” categories entirely. Companies would instead fall into only two main categories:
- Large Accelerated Filers
- Non-Accelerated Filers
4. Most Public Companies Would Become Non-Accelerated Filers: If adopted today:
- Only about 19% of public companies would qualify as large accelerated filers
- About 81% would become non-accelerated filers
5. Smaller Companies Would Receive Extra Filing Time: A new subgroup called “Small Non-Accelerated Filers” would be created for companies with assets of $35 million or less for the prior two years. These companies would receive an extra 30 days for Form 10-K filings – and an extra 5 days for Form 10-Q filings.
6. Auditor Attestation Requirements Would Narrow Significantly: Non-accelerated filers would no longer need an auditor attestation on internal controls under Section 404(b) of Sarbanes-Oxley. This obligation would primarily remain for large accelerated filers.
The Annex of the fact sheet shows off the proposed new filing structure nicely, copied below:
Authored by
Broc Romanek