SEC Reporting Companies and Disclosure Requirements
SEC Reporting Companies and Disclosure Requirements- Today is the continuation in a Lawcast series discussing SEC disclosure requirements and in particular the 341 page Regulation S-K concept release and request for public comment issued by the SEC on April 15, 2016.
The SEC disclosure requirements are scaled based on company size. The categories of reporting companies include (i) an emerging growth company; (ii) a smaller reporting company; (iii) a non-accelerated filer; (iv) an accelerated filer; and (v) a large accelerated filer.
The JOBS Act created the “emerging growth company” for which certain scaled-down disclosure requirements apply for up to 5 years after an initial IPO. An emerging growth company is one that has total annual gross revenues of less than $1 billion during its most recent completed fiscal year. A “smaller reporting company” is defined as one that, among other things, has a public float of less than $75 million in common equity, or if unable to calculate the public float, has less than $50 million in annual revenues. Similarly a non-accelerated filer has a public float of less than $75 million but does not yet have to file accelerated reports.
An accelerated filer has a public float in excess of $75 million but less than $700 million, has been public for at least 12 months and has filed at least one annual report as a public company. A large accelerated filer has a public float in excess of $700 Million.
In addition to scaled disclosure requirements in terms of the amount of disclosure, the scaled disclosure requirements also pertain to the time of filing. A large accelerated filer must file its annual form 10-K within 60 days of its fiscal year end and its Form 10-Q’s within 40 days of quarter end. An accelerated filer must file its annual Form 10-K within 75 days of fiscal year end and its Form 10-Q within 40 days of quarter end. All other categories must file their annual Form 10-K within 90 days of fiscal year end and quarterly form 10-Q within 45 days of quarter end.
Sometimes a company fits within both the emerging growth company and smaller reporting company category. A company that has been public for more than 5 years would never be an emerging growth company, but could remain a smaller reporting company for an indefinite period of time. However, the scaled down disclosure requirements are not completely the same for each and the SEC is considering whether they should be adjusted to further align.
The SEC Advisory Committee on Small and Emerging Companies suggested that the SEC should revise the definition of “smaller reporting company” to include companies with a public float of up to $250 million. This will increase the class of companies benefitting from a broad range of benefits to smaller reporting companies, including (i) exemption from the pay ratio rule; (ii) exemption from the auditor attestation requirements; and (iii) exemption from providing a compensation discussion and analysis. In addition, the Committee suggested that the SEC should revise the definition of “accelerated filer” to include companies with a public float of $250 million or more but less than $700 million. As a result, the auditor attestation report under Section 404(b) of the Sarbanes Oxley Act would no longer apply to companies with a public float between $75 million and $250 million.
Although the SEC seeks public comment as to changes in the eligibility standards for each category, it does not make particular recommendations in the S-K Concept Release but rather indicates that it is currently evaluating the criteria.