The Securities and Exchange Commission voted Monday to propose amendments that would expand the threshold for businesses to qualify as a “smaller reporting company.”
The proposal would change the definition and expand the number of companies that could qualify as smaller reporting companies. In turn, they would not need to disclose as much information as larger companies under the SEC’s rules and regulations, particularly Regulations S-K and S-X.
“Raising the financial thresholds in the smaller reporting company definition is intended to promote capital formation and reduce compliance costs for smaller companies while maintaining important investor protections,” said SEC Chair Mary Jo White in a statement. “The Commission will benefit greatly from the public comments we receive from investors, issuers and other affected market participants on today’s proposal, as well as comments we receive on the Regulation S-K concept release, which will help inform any changes to the scaled disclosure system or other changes to our disclosure requirements.”
The SEC’s proposed rules would allow a company with less than $250 million of public float to provide scaled disclosures as a smaller reporting company, compared to the $75 million threshold under the current definition. If a company does not have a public float, it would be allowed to provide scaled disclosures if its annual revenues are less than $100 million, as compared to the current threshold of less than $50 million in annual revenues.
As in the SEC’s current rules, once a company surpasses either of those thresholds, it would not qualify as a smaller reporting company again until its public float or revenues decline beneath a lower threshold. Under the new proposal, a company would qualify only if its public float is less than $200 million or, if it has no public float, its annual revenues are less than $80 million.
The SEC said it is not proposing to increase the $75 million threshold in the “accelerated filer” definition, however. Therefore, businesses with $75 million or more of public float that would qualify as smaller reporting companies would be subject to the current requirements that now apply to accelerated filers. That includes the timing for filing periodic reports and the requirement that accelerated filers provide an auditor’s attestation of management’s assessment of internal controls over reporting under Section 404(b) of Sarbanes-Oxley.
The SEC is asking for public comments on the proposal within 60 days after it is published in the Federal Register. To send comments, use the SEC’s Internet submission form or email email@example.com.
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