SEC to relax reporting rules for smaller companies

The Securities and Exchange Commission (SEC) has opened a 60-day consultation on changes to the definitions of ‘accelerated filer’ and ‘large accelerated filer’ to reduce compliance costs for smaller reporting companies in the US

Currently accelerated filers are those issuers that have a public float of at least $75m (£58m), while large accelerated filers are those with a public float of over $700m.

Last year the regulator made changes to its definition of smaller reporting companies (SRCs) intending to reduce their compliance burden. However, those amendments did not offer SRCs relief from the requirement to have an auditor attestation of their internal controls, under Sarbanes-Oxley rules. They also introduced unnecessary complexity into the definition of SRC and accelerated filer.

In response, the SEC is now proposing amendments to the accelerated filer and large accelerated filer definitions, which are designed to reduce costs for certain lower revenue companies by more appropriately tailoring the types of companies that are categorised as accelerated and large accelerated filers. 

As a result, SRCs with less than $100m in revenues would not be required to obtain an attestation of their internal control over financial reporting from an independent outside auditor. 

Specifically, the proposals exclude from the accelerated and large accelerated filer definitions an issuer that is eligible to be an SRC and had no revenues or annual revenues of less than $100m in the most recent fiscal year for which audited financial statements are available.

They increase the transition thresholds for accelerated and large accelerated filers becoming a non-accelerated filer from $50m to $60m and for exiting large accelerated filer status from $500m to $560m.

The proposals also add a revenue test to the transition thresholds for exiting both accelerated and large accelerated filer status.

Jay Clayton, SEC chairman, said: ‘Investors in these lower revenue companies will benefit from more tailored control requirements. Many of these smaller companies – including biotech and health care companies – will be able to redirect the savings into growing their companies by investing in research and human capital.’

Pat Sweet

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