The Securities and Exchange Commission proposed to simplify the reporting requirements for companies seeking to go public, including changing the definitions of large accelerated filers and non-accelerated filers, while providing a new subcategory of small non-accelerated filers that would get extra time to file their Form 10-K annual reports and Form 10-Q quarterly reports. Non-accelerated filers would be exempted from audits of their internal controls over financial reporting.
The proposed rule amendments would raise the threshold for a public company to become a large accelerated filer from $700 million to $2 billion. A company would not become a large accelerated filer for at least 60 months following its IPO regardless of its public float, effectively providing it an "IPO on-ramp" to stabilize and grow while benefiting from disclosure scaling and other accommodations.
All other public companies would be categorized as non-accelerated filers and would benefit from nearly all disclosure scaling and other accommodations currently available to smaller and emerging companies. All non-accelerated filers would also be exempt from the requirement to obtain an auditor's attestation on their internal control over financial reporting.
In addition, the proposed rules would establish a subcategory of small non-accelerated filers that would receive an additional 30 days to file their Form 10-K annual reports and an extra five days to file their Form 10-Q quarterly reports. The change aims to reduce the reporting costs for this category of companies, which represent the smallest 18% of public companies by assets.
The proposed amendments would also extend disclosure scaling and other accommodations currently used by smaller or emerging companies to approximately 81% of all current public companies. New public companies would enjoy these accommodations for up to five years. The smallest public companies also would have extra time to file their annual and other periodic reports.
"Today, the Commission proposed two rulemakings that serve as the foundation for my agenda to Make IPOs Great Again," said SEC chairman Paul Atkins in a
Earlier this month, Atkins also floated a
The proposed amendments, along with the recently proposed option for semiannual interim reporting and other upcoming rule proposals, aim to incentivize companies to go and stay public.
The SEC said the registered offering reform proposal, if it were to be adopted, would be the most significant modernization of the registered offering framework in more than 20 years. Under the proposal, more public companies would be able to conduct shelf offerings, enabling faster access to the public capital markets, regardless of the company's public float.
More public companies would be able to use certain registration and offering communication flexibilities that currently are reserved for companies with a large public float defined as "well-known seasoned issuers. Broker-dealers would be able to provide research report coverage for more public companies.
State securities law registration and qualification requirements would be preempted for all registered offerings, as a way to lower the costs and complexity of conducting a multi-state registered offering.
The proposal would maintain parity between certain Form N-2 filers and operating companies across registration, offering, and communication provisions, and access to broad-based advertising for certain non-variable annuity insurance products would be expanded.
Other facets of the registration process would also be streamlined under the proposal, such as the ability to incorporate information by reference into Form S-1.
The public comment period for the proposals will be open for 60 days after publication of the proposing releases in the Federal Register.
