SUPPLEMENTARY INFORMATION:

The Commission is proposing to amend or add the following rules and forms:

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( printed page 30088)

Table of Contents

I. Introduction

A. Exchange Act Reporting Prior to 2002

B. Accelerated Filer Status; Sarbanes-Oxley Act

C. ICFR Requirements

D. Actions Related to Smaller Reporting and Emerging Growth Companies

1. Establishment of SRC Status

2. The JOBS Act and EGC Status

3. Recent Amendments and Filer Status Complexity

II. Discussion of Proposed Rules

A. Large Accelerated Filer Status Amendments

1. Public Float Threshold

2. Public Float Determination

3. Seasoning

B. Non-Accelerated Filer Amendments

1. Non-Accelerated Filer Definition

2. ICFR and the Auditor Attestation Requirement

3. Extension of SRC and EGC Accommodations and Disclosure Requirements

4. Application to Other Filer Types

5. Summary of Requirements for LAFs and NAFs Under the Proposal

C. Small Non-Accelerated Filers

D. Proposed Transition Period

E. Updating Small Entity Definitions

F. Other Amendments

III. Other Matters

IV. Economic Analysis

A. Baseline and Affected Parties

1. Regulatory Baseline

2. Affected Parties

3. Registrant Characteristics

B. Economic Benefits and Costs

1. General Economic Effects of the Proposed Amendments

2. Amendments to LAF Definition

3. Exemption From ICFR Auditor Attestation

4. The Expansion of the Subset of Registrants Eligible for Extended Periodic Report Filing Deadlines

5. Extending SRC and Certain EGC Accommodations to All NAFs

6. Extending Filing Deadlines for the Smallest NAFs

7. Updating Small Entity Definition

8. Additional Considerations

9. Aggregate Monetized Benefits and Costs

C. Anticipated Effects on Efficiency, Competition, and Capital Formation

D. Reasonable Alternatives

1. LAF Public Float Threshold

2. Seasoning Requirement

3. Regulatory Accommodations for NAFs

4. SNFs

E. Request for Comment

V. Paperwork Reduction Act

A. Summary of the Collections of Information

B. Estimated Paperwork Burden Effects of the Proposed Amendments

C. Incremental and Aggregate Burden and Cost Estimates

D. Request for Comment

VI. Congressional Review Act

VII. Initial Regulatory Flexibility Act Analysis

A. Reasons for, and Objectives of, the Proposed Action

B. Legal Basis

C. Small Entities Subject to the Proposed Amendments

D. Projected Reporting, Recordkeeping, and Other Compliance Requirements

E. Duplicative, Overlapping, or Conflicting Federal Rules

F. Significant Alternatives

Statutory Authority

I. Introduction

From their inception, the U.S. securities laws have sought to require full and fair disclosure by companies seeking to raise capital from investors and access the public markets.^[6] In enacting broad investor protections and disclosure requirements under the securities laws, Congress also recognized the need to take into account the burdens of registration.^[7] A core function of the Exchange Act is to extend disclosure-based investor protections that are provided for public offerings of securities under the Securities Act to post-distribution trading in the secondary markets. This is accomplished primarily by sections 12,^[8] 13(a),^[9] and 15(d) ^[10] of the Exchange Act, which impose periodic and current reporting requirements on companies: ( printed page 30089) with exchange-listed securities (section 12(b)); with widely held classes of equity securities (section 12(g)); or that have completed a public offering registered under the Securities Act (section 15(d)).^[11] These registrants ^[12] must file reports prescribed by the Commission, which generally include annual reports on Form 10-K and quarterly reports on Form 10-Q.^[13] With respect to investment companies, business development companies (“BDCs”) and face-amount certificate companies are also subject to these reporting requirements.^[14]

Over time, the Commission and Congress have adopted various “filer statuses” to establish tiers of registrants and offer certain accommodations by tier, including as to the timing and content of this periodic reporting. Current filer statuses include:

• Large accelerated filer (“LAF”), accelerated filer  ^[15] (“AF”), and non-accelerated filer (“NAF”).

○ Filing deadlines for periodic reports depend on whether a registrant is classified as an LAF, an AF, or neither of these, which we refer to as an NAF.^[16]

○ Only LAFs and AFs are required to have the registered public accounting firm that prepares or issues their financial statement audit report attest to, and report on, management's assessment of the effectiveness of internal control over financial reporting (“ICFR”) (“ICFR auditor attestation”) under section 404(b) of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”).^[17]

• Smaller reporting company  ^[18] (“SRC”) is a regulatory status that applies to smaller registrants permitting those registrants to comply with a number of scaled disclosure requirements, discussed in detail below,^[19] which notably include scaled financial statement disclosure and scaled executive compensation disclosure, among other accommodations.

• Emerging growth company (“EGC”) is a statutorily-defined status that applies to registrants for the first five years after their initial public offering so long as they do not become an LAF or surpass revenue and debt issuance limitations.^[20] The EGC accommodations are described more fully below ^[21] and notably include scaled financial statement disclosure in an EGC's initial public equity offering registration statement, deferred adoption of certain new or revised financial accounting standards, scaled executive compensation disclosure, and an exemption from the ICFR auditor attestation requirement.^[22]

The table below lists the periodic reporting deadlines that currently apply to LAFs, AFs, and NAFs.^[23]

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The filer status framework that has developed is layered and complex.^[24] Under the current system, registrants must annually reevaluate their filer status at the end of their fiscal year. To do so, they consider both their public float ^[25] as of the end of their second fiscal quarter and their annual revenue, and compare those figures to thresholds that vary based on whether a registrant is entering or exiting a particular filer status. Additionally, registrants qualifying as EGCs must evaluate whether they met any of the disqualifying provisions of an EGC throughout the year. The table below illustrates the combinations of filer statuses that are possible today, highlights the overlap that can occur among filer statuses, and provides the entry thresholds for each status and the proportion of registrants in each permutation:^[26]

The table reflects the current thresholds for initially entering into a particular status, but, under existing rules, the thresholds are often different for determining when a registrant transitions out of that status. Under current rules, LAFs transition to AF status when their public float falls below $560 million, and AFs and LAFs transition out of either such status when their public float falls below $60 million or they determine that they are eligible to use the requirements for SRCs under the revenue test in paragraph (2) or (3)(iii)(B) of the smaller reporting company definitions in 17 CFR 230.405 and 17 CFR 240.12b-2. Similarly, once a registrant exits SRC status, the registrant will only transition back into SRC status if its public float falls below $200 million, or its public float falls ( printed page 30091) below $560 million and its revenues fall below $80 million.^[27] In addition, because the definitions for the accelerated filer statuses rely in part on SRC status, these transition thresholds also affect accelerated filer status determinations.

In addition to the complexity of the current filer status framework, we note that the number of Exchange Act reporting companies filing on domestic forms fell from 6,996 in 2004 to 5,976 in 2024.^[28] Unsurprisingly, a similar time period (2009-2017) saw significant growth in private markets, with private markets regularly outpacing public markets in capital raised.^[29] Recent studies point to a variety of conditions influencing companies that might previously have gone public to remain private, with the regulatory burdens and costs of being a public company consistently considered to be among the factors that have led to this trend.^[30] The Commission's two most recent Small Business Forums explored the obstacles facing smaller companies trying to go public. In 2025, the issues discussed included having to produce three years of audited financial statements, having to produce reports on a quarterly basis, the volume of disclosure requirements, and the complexity of the filer status framework.^[31] In 2026, many of the same themes were explored, with notable discussion on the cost of compliance with section 404(b) of the Sarbanes-Oxley Act, the impact on a registrant's ability to plan for those costs in light of an AF public float threshold that is based on a single measurement date, and the limited personnel and resources small companies can devote to such costs.^[32] Similar recommendations came out of prior years' forums and other roundtables.^[33]

We are also aware of continued concerns regarding the cost of compliance with the ICFR auditor attestation requirement under section 404(b) of the Sarbanes-Oxley Act.^[34] Some comments on the 2019 Accelerated Filer Release stated that the ICFR auditor attestation requirement is the most costly aspect of being an AF and indicated that, in relative terms, it is particularly costly for low-revenue registrants.^[35] In addition, a recent Government Accountability Office (“GAO”) study found that Section 404(a) and (b) compliance costs are more burdensome in relative terms for smaller companies.^[36] At the same time, the ICFR auditor attestation requirement has benefits for investors, including that it enhances the reliability of management's disclosure related to ICFR and may help a registrant identify a significant deficiency or identify and disclose a material weakness in ICFR that had not been identified or properly characterized by management.^[37]

While registration and entry into the public capital markets is not always necessary or appropriate for smaller or emerging companies,^[38] a robust pipeline of companies joining the public markets benefits investors by providing them with a more diverse set of investment opportunities and greater transparency. ( printed page 30092) It also benefits companies in various ways, including by providing them new sources of capital at a potentially lower cost. The Commission has long considered the regulatory burdens of public company registration and ongoing compliance with the regulations that apply to public companies. Indeed, the Commission has previously taken steps with the aim of increasing the viability of entry into the public markets to more companies, by adopting simplified registration rules and processes for issuers while carefully balancing investors' need for timely and appropriate disclosure. For example, in a series of actions spanning decades, the Commission has routinely simplified and tailored smaller issuers' disclosure obligations.^[39] In 2005, the Commission reformed the securities offering process by, among other actions, liberalizing permitted offering communications, updating prospectus delivery requirements, and modernizing the shelf registration provisions.^[40] Nonetheless, changes in the securities laws have resulted in an increasingly complicated regulatory framework that warrants reconsideration, including a reassessment of whether the disclosure burdens faced by registrants are properly balanced with the corresponding benefits to investors and markets.

We are therefore proposing amendments to our regulations to rationalize the existing Exchange Act filer status framework, which will simplify reporting and disclosure requirements and reduce burdens on most reporting companies, while continuing to seek full and fair disclosure for investors. To provide context to our proposed amendments, we briefly trace the evolution of the current filer status framework below.

A. Exchange Act Reporting Prior to 2002

The Commission adopted the “integrated disclosure system” in 1982 following several years of analysis of the disclosure rules under the Securities Act and the Exchange Act.^[41] Prior to the adoption of the integrated disclosure system, separate disclosure regimes applied to Securities Act registration statements and Exchange Act registration and periodic reporting, which often resulted in overlapping and duplicative requirements. At the time the integrated disclosure system was adopted, the Commission stated that the “goal of the Commission's integrated disclosure program has been to revise or eliminate overlapping or unnecessary disclosure and dissemination requirements wherever possible, thereby reducing burdens on registrants while at the same time ensuring that security holders, investors and the marketplace have been provided with meaningful nonduplicative information upon which to base investment decisions.” ^[42]

Under the integrated disclosure system, most registration and reporting forms under the Securities Act and the Exchange Act refer to common disclosure requirements codified in Regulation S-K and Regulation S-X. In recognition of the difficulties that smaller issuers were facing in accessing the capital markets, the Commission adopted Regulation S-B in 1992, an integrated disclosure system tailored specifically to a set of “small business issuers,” as defined by revenues and public float, and provided specialized forms under the Securities Act and Exchange Act that referenced simplified disclosure requirements for these issuers.^[43]

As a result of these accommodations, prior to 2002, there were effectively two Exchange Act filer statuses: a “default” category of issuers that filed periodic reports on Forms 10-K and 10-Q under Regulation S-K, and a small business issuer category that filed periodic reports on Forms 10-KSB and 10-QSB under Regulation S-B. Commission rules applied uniform filing deadlines to all Exchange Act reporting companies' periodic reports: 90 days after fiscal year end for annual reports, and 45 days after quarter end for quarterly reports.

B. Accelerated Filer Status; Sarbanes-Oxley Act

Following a series of corporate and accounting scandals in the early 2000s that led to financial restatements and bankruptcies and resulted in significant adverse effects on shareholders, the Commission established “accelerated filer” status by adopting accelerated filing deadlines for certain registrants. Congress subsequently enacted the Sarbanes-Oxley Act,^[44] which included ICFR requirements intended to improve the accuracy and reliability of corporate disclosures.

The Commission's adoption of AF status was motivated in part by advances in communication technology and companies' growing practice of releasing quarterly earnings well before the Form 10-Q deadline.^[45] The new “accelerated filer” status therefore accelerated the periodic report filing deadlines for registrants with a public float of $75 million or more, who had been subject to Exchange Act reporting requirements for at least 12 months, and had previously filed at least one annual report.^[46] In acting to further categorize the filer statuses in this way, the Commission sought to “balance the market's need for information with the time companies need to prepare that information without undue burden.” ^[47]

The Commission again amended the filer status rules in 2005 by introducing the LAF status.^[48] The Commission sought to avoid applying the shortest filing deadlines to registrants with less than $700 million in public float by further dividing filers into LAFs ( printed page 30093) (registrants with $700 million or more in public float) and AFs (registrants with at least $75 million in public float but less than $700 million). All remaining registrants with less than $75 million in public float have become known as NAFs. While the Commission acknowledged the incremental benefit of more timely accessibility to periodic reports, it was concerned with the added burdens associated with the increased acceleration of the deadlines.^[49] The Commission determined to limit the shortest deadlines to the largest registrants, reasoning that LAFs, “are more likely than smaller companies to have a well-developed infrastructure and financial reporting resources to support further acceleration of the annual report deadline.” ^[50]

As a result of this and later developments,^[51] under the current definition in Rule 12b-2, an LAF is a registrant that: (1) has a public float of $700 million or more, as of the last business day of its most recently completed second fiscal quarter, calculated using either the closing price or the average of the bid and ask prices that day; (2) has been subject to the requirements of Exchange Act section 13(a) or 15(d) for at least 12 calendar months; (3) has filed at least one annual report pursuant to the Exchange Act; and (4) is not eligible to be an SRC under the SRC revenue test. LAFs' periodic reporting deadlines are 60 days for Form 10-K, and 40 days for Form 10-Q, while AFs' deadlines are 75 and 40 days, respectively; and the deadlines for NAFs remain at 90 and 45 days, respectively.^[52]

C. ICFR Requirements

In 2002, less than two months before the Commission adopted the rules for AFs, Congress enacted the Sarbanes-Oxley Act.^[53] One aspect of the Sarbanes-Oxley Act's reforms was the adoption of section 404. Section 404(a) mandates Commission rules requiring Exchange Act reporting companies to include in their annual reports an internal control report that states the responsibility of management for establishing and maintaining ICFR and that contains an assessment of the effectiveness of the registrant's ICFR as of the end of each fiscal year.^[54] Section 404(b) requires that each registered public accounting firm that prepares or issues the registrant's financial statement audit report attest to, and report on, management's assessment of the effectiveness of the ICFR.^[55] As discussed below, Congress took further action in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) ^[56] and the Jumpstart Our Business Startups (“JOBS”) Act,^[57] to exempt from section 404(b): (1) any registrant that is not an LAF or an AF and (2) any registrant that is an EGC, respectively.

As mandated by section 404, the Commission adopted rules in 2003 requiring registrants that are subject to Exchange Act reporting requirements to include in their annual reports a report of management on the registrant's ICFR and an attestation report by the registrant's auditors on management's assessment of the internal controls.^[58] Although section 404 generally requires and directs the Commission to adopt rules regarding ICFR that apply to every issuer that is required to file reports pursuant to Exchange Act section 13(a) or 15(d), registered investment companies (“RICs”) under section 8 of the Investment Company Act ^[59] are specifically exempted from section 404 by section 405.^[60] In addition, the Commission's rules implementing section 404 exempted other types of issuers, such as asset-backed issuers, from the ICFR obligations.^[61] The Commission also determined that FPIs and Canadian multijurisdictional disclosure system (“MJDS”) issuers must have their management assess and report annually on the effectiveness of their ICFR as of the end of their fiscal year and include an auditor attestation report on ICFR in their annual report form if the FPI or MJDS issuer is an AF or LAF, other than an EGC.^[62] BDCs, however, are subject to the rules adopted by the Commission to implement section 404.^[63]

Through a series of actions from 2003 through 2009, the Commission delayed compliance with section 404 for NAFs, acknowledging that “non-accelerated filers, including smaller companies and foreign private issuers, may have greater difficulty in preparing the management report on internal control over financial reporting.” ^[64] Ultimately, Congress ( printed page 30094) enacted section 989G of the Dodd-Frank Act, which added section 404(c) to the Sarbanes-Oxley Act to exempt issuers that are neither LAFs nor AFs, as defined by the Commission, from the ICFR auditor attestation requirement of section 404(b).^[65] Section 404(c) also directed the Commission to conduct a study to determine how the Commission could reduce the burden of complying with the section 404(b) ICFR auditor attestation requirement for companies with public float between $75 million and $250 million. Congress further extended relief from section 404(b) in the JOBS Act when it exempted EGCs from the requirement.^[66]

In April 2011, the Commission staff published the required study and recommendations relating to section 404(b).^[67] The study found that, while initial implementation of section 404 resulted in a steep increase in audit fees, there was a statistically significant decrease in compliance costs (including audit fees) for registrants subsequent to the issuance of PCAOB Auditing Standard No. 5 ^[68] and related Commission guidance ^[69] on management's report on ICFR. Based on the study's findings, the staff did not recommend changing the scope of the ICFR auditor attestation requirement at that time, but encouraged activities to further improve the effectiveness and efficiency of implementation of the ICFR requirements.^[70]

As discussed in more detail below, the Commission modified the definition of AF in 2020 to exclude a registrant that is eligible to be an SRC and has annual revenues of less than $100 million.^[71] In excluding low-revenue SRCs from AF status, the Commission also exempted those registrants from the ICFR auditor attestation requirement. In the adopting release, the Commission found that the ICFR auditor attestation requirement is disproportionately costly to small issuers, noting that the fixed costs of compliance are not scalable for smaller issuers and that low-revenue issuers have limited access to internally generated capital such that the costs may more directly constrain their ability to invest and hire.^[72] Commentators and registrants continue to express concerns regarding the costs of implementation of section 404 and the disproportionate effect on smaller issuers.^[73]

D. Actions Related to Smaller Reporting and Emerging Growth Companies

1. Establishment of SRC Status

Through the course of implementing the enhanced disclosure and other requirements of the Sarbanes-Oxley Act, the Commission recognized the increased regulatory burden faced by registrants.^[74] This eventually led in 2007 to the Commission reworking its regulatory framework for smaller registrants by establishing the “smaller reporting company” filer status.^[75] As part of the revisions, the Commission rescinded Regulation S-B and the “small business issuer” definition.^[76] Under the 2007 rules, all filers that were not AFs or LAFs— i.e., those with less than $75 million in public float ^[77] —were designated as SRCs, and granted most of the scaled disclosure accommodations that had previously been provided to “small business issuers.” ^[78] The SRC definition excludes asset-backed issuers, RICs, BDCs, and majority-owned subsidiaries of issuers that do not qualify as an SRC. Additionally, FPIs are not eligible to use the requirements for SRCs unless they use the forms and rules designated for domestic issuers and provide financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).^[79]

The revised streamlined regulatory framework moved all disclosure requirements back into Regulation S-K and Regulation S-X, consolidated smaller issuers and NAFs into the same filer status, and expanded the number of registrants eligible to use scaled disclosure requirements.^[80] The ( printed page 30095) amendments effectively established a three-tier filer status framework:

• LAFs having a public float of $700 million or more, subject to the most accelerated filing deadlines and the most comprehensive disclosure requirements;
• AFs having a public float of $75 million or more, but less than $700 million, subject to less accelerated filing deadlines and the most comprehensive disclosure requirements; and
• SRCs having a public float of less than $75 million (or, if without a calculable public float, annual revenues below $50 million), subject to non-accelerated filing deadlines and scaled disclosure requirements.

At the time of initial adoption of SRC status, LAFs and AFs were generally subject to the same disclosure requirements as each other. SRCs, however, were (and currently remain) permitted to avail themselves of certain scaled disclosure accommodations, which currently include:

• To provide two (instead of three) years of audited financial statements, and prepare their financial statements in accordance with Article 8 of Regulation S-X; ^[81]

• To provide two (instead of three) years of summary compensation table information and tabular and other compensation disclosure for three (instead of five) named executive officers;
• To omit the compensation discussion and analysis, compensation policies and practices related to risk management, pay ratio disclosure, grants of plan-based awards table, pension benefits table, option exercises and stock vested table, and nonqualified deferred compensation table; ^[82]

• To provide scaled golden parachute and pay versus performance disclosure; ^[83]

• To omit disclosure relating to risk factors in periodic reports; ^[84] a stock performance graph; ^[85] quantitative and qualitative disclosure about market risk; ^[86] supplementary financial information relating to the disclosure of material quarterly changes and information about oil and gas activities; ^[87] policies and procedures for the review, approval, or ratification of related party transactions; ^[88] and certain payments made by resource extraction issuers; ^[89] and

• To provide a simplified description of business.^[90]

By contrast, Item 404 of Regulation S-K, which addresses related-party transaction disclosure, includes in Item 404(d) certain requirements for SRCs that are more rigorous than those for other filers,^[91] namely:

• Rather than a flat $120,000 threshold for the disclosure of related-party transactions, the threshold is the lesser of $120,000 or one percent of total assets;
• Disclosures are required about underwriting discounts and commissions where a related person is a principal underwriter or a controlling person or member of a firm that was or is going to be a principal underwriter;
• Disclosures are required about the issuer's parent(s) and their basis of control; and
• An additional year of disclosures is required regarding transactions with related persons.^[92]

2. The JOBS Act and EGC Status

In 2012, Congress enacted the JOBS Act, which established a new “emerging growth company,” or EGC, filer status and provided disclosure and other accommodations to EGCs.^[93] Currently, a company qualifies as an EGC if it has total gross revenues of less than $1.235 billion during its most recently completed fiscal year and continues to qualify as an EGC until the earliest of: (1) the last day of the fiscal year of the issuer during which it has total annual gross revenues of $1.235 billion or more; (2) the last day of its fiscal year following the fifth anniversary of the first sale of its common equity securities pursuant to an effective registration statement; (3) the date on which the issuer has, during the previous three-year period, issued more than $1 billion in nonconvertible debt; or (4) the date on which the issuer is deemed to be an LAF (as defined in Exchange Act Rule 12b-2).^[94] Congress supplemented the JOBS Act by enacting the Fixing America's Surface Transportation (“FAST”) Act,^[95] which provided for targeted additional accommodations for EGCs and required the Commission “to further scale or eliminate requirements of Regulation S-K, in order to reduce the burden on emerging growth companies, accelerated filers, smaller reporting companies, and other smaller issuers, while still providing all material information to investors.” ^[96]

EGC status provides a registrant with accommodations that lower the costs and burdens of registration and reporting and is generally seen as an “on-ramp” for newly public companies to ease the burdens of transitioning from a private to a public company.^[97] While there are overlaps between the EGC and SRC populations and their respective accommodations, EGCs are entitled to a similar but distinct set of accommodations. EGCs are:

( printed page 30096)

• Exempt from the ICFR auditor attestation requirement,^[98] the requirement to hold shareholder advisory votes on executive compensation,^[99] pay ratio disclosure,^[100] and pay versus performance disclosure; ^[101]

• Permitted to provide two (instead of three) years of audited financial statements in the registration statement for an initial public offering of common equity securities, and to defer compliance with new or revised financial accounting standards until a company that is not an issuer is required to comply with such standards, if such standard applies to private companies; ^[102]

• Permitted to provide executive compensation disclosure to match the information required from issuers with less than $75 million in public float (the SRC threshold at the time of adoption of the JOBS Act); ^[103] and

• Permitted to submit certain draft registration statements to the Commission on a confidential basis.^[104]

3. Recent Amendments and Filer Status Complexity

While a registrant cannot be both an EGC and an LAF,^[105] as shown in the table in section I above, a registrant can be both an EGC and an SRC, or both an EGC and an AF. When the Commission updated the SRC, AF, and LAF thresholds in 2018, the SRC public float threshold was raised to $250 million, and the SRC revenue threshold was raised to $100 million.^[106] Along with the increase of these thresholds, the Commission removed the automatic exclusion of SRCs from the definition of AF and LAF. As a result of these changes, SRCs went from being exclusively NAFs to a separate, additional status (like EGC status) that could attach to either NAFs or AFs. Further, SRCs can also be EGCs, and these statuses involve largely overlapping but distinct obligations and accommodations.

When adopting the 2018 amendments to the SRC definition, the Commission acknowledged the “regulatory complexity” created by this potential overlap between the SRC and AF definitions.^[107] Subsequently, in 2020, the Commission adopted amendments to the definitions of AF and LAF seeking to tailor the types of issuers included in those filer statuses.^[108] The rules, as amended, now exclude low-revenue SRCs (those with under $100 million in annual revenues and either no public float or a public float of less than $700 million) from the definitions of AF and LAF, increasing the number of registrants that qualify as NAFs.^[109] As NAFs, these registrants, among other things, are not required to obtain an ICFR auditor attestation. The amendments were intended to thereby reduce compliance costs for these registrants while maintaining investor protections by more appropriately tailoring the types of registrants that are included in the categories of AF and LAF.^[110]

While the amendments increased the number of SRCs that qualify as NAFs, the Commission determined not to fully align the statuses.^[111] The Commission acknowledged that such alignment would promote greater regulatory simplicity and reduce friction or confusion associated with registrants' determination of their filer status or reporting regime.^[112] It expressed concerns, however, that such alignment could result in adverse effects on the reliability of the financial statements and the ability of investors to make informed investment decisions about those issuers.^[113] Thus, the amendments reduced the overlap between AF status and SRC status by including low-revenue SRCs as NAFs ( i.e., those with a public float of $75 million or more but less than $250 million, regardless of annual revenues, and those with public float of less than $700 million and annual revenues of less than $100 million), but added an additional determination for SRC status.

We are proposing to revise the current rules to streamline and further scale disclosure and reporting requirements. Among our objectives is to reduce compliance costs and create a more attractive on-ramp for newly public companies, thereby reducing regulatory impediments that may be deterring companies from participating in the public market and encouraging more companies to go and stay public, while ensuring that investors have the information necessary to inform their investment and voting decisions.

II. Discussion of Proposed Rules

As detailed above, the Commission's rules currently set forth five filer statuses that correspond to varying levels of disclosure and other requirements, which are sometimes overlapping and often complex for issuers to determine.^[114] LAFs are subject to the most stringent requirements, and NAFs that are also both SRCs and EGCs are afforded the most accommodations. LAFs in 2024 accounted for 35.4 percent of registrants and 98.8 percent of total market public float.^[115] In contrast, in 2024, while NAFs, including NAFs that are also SRCs or EGCs (or both), accounted for 51.9 percent of registrants, they accounted for only 1.2 percent of total market public float.^[116]

We are proposing amendments with the goal of streamlining the overlapping Exchange Act filer statuses and further ( printed page 30097) scaling disclosures and other accommodations while ensuring that investors continue to receive timely and material information. To do so, the proposed amendments seek to align disclosure and other reporting requirements and reporting deadlines with registrants' public float. As a result of the proposed amendments, companies that collectively make up the majority of the U.S. equity market capitalization would be subject to the most comprehensive requirements and earliest filing deadlines, while all other issuers would be afforded the proposed scaled disclosure and other accommodations. The proposed amendments would provide for simplified compliance and reduced costs for a majority of registrants. Additionally, we are proposing to extend the filing deadlines for the smallest companies in order to reduce the burden on these companies and further accommodate their ability to efficiently comply with Exchange Act reporting. As described in more detail below, the proposed amendments would:

• Revise the LAF filer status to:

○ Raise the threshold for becoming an LAF from the current $700 million to $2 billion in public float, which would represent 93.5 percent of the current total market public float; ^[117]

○ Establish a new, more stable, public float calculation window that provides for the determination of public float based on the average price of the registrant's voting and non-voting common equity held by non-affiliates over the last 10 trading days of the second quarter of a registrant's fiscal year; ^[118]

○ Establish that a registrant will only transition into or out of a status after the registrant has been above or below the public float threshold for two consecutive years; ^[119] and

○ Increase the seasoning threshold for becoming an LAF to 60 consecutive calendar months.^[120]

• Establish the NAF filer status and consolidate and extend to NAFs currently available scaled disclosure and other accommodations by:

○ Establishing an NAF definition that encompasses all registrants that are not LAFs; ^[121] and

○ Applying to NAFs the current disclosure requirements applicable to SRCs and EGCs, including not requiring an ICFR auditor attestation.^[122]

• Extend to NAFs the requirement currently applicable to LAFs and AFs to disclose on Form 10-K or Form 20-F the substance of material unresolved staff comments regarding the registrant's periodic or current reports received at least 180 days before a registrant's fiscal year end.^[123]

• Eliminate AF and SRC filer statuses as unnecessary in light of the amendments described above.^[124]

• Create a sub-category consisting of the smallest NAFs (“SNFs”), comprising NAFs reporting total assets of $35 million or less as of the end of an issuer's two most recent second fiscal quarters, that would be eligible for extended deadlines for filing their Form 10-K and Form 10-Q periodic reports.^[125]

Consistent with the Commission's history of considering how its regulatory regime can serve investors while avoiding unnecessary regulatory burdens to registrants, we believe the time is ripe to again rebalance the disclosure and other requirements applicable to issuers of given sizes. Evidence shows that regulatory changes over the last two decades, which increased the costs of public company reporting, have contributed to a decline in the number of public companies in the United States.^[126] We believe the proposed amendments are a meaningful step in making the public markets more attractive, which would encourage more companies to go and stay public while ensuring that investors remain equipped to make informed investment and voting decisions, which would in turn improve investment opportunities and the information available to investors in such companies.

In this regard, the proposed scaling and accommodations would in many cases apply to disclosures, such as in the area of executive compensation and corporate governance matters, where the associated potential benefits may not be commensurate with their costs to registrants. Further, we believe any loss of information and assurance or increased costs to investors in registrants that would newly receive certain accommodations would be justified by the expected reduction in costs to those registrants, as well as by effects that may encourage more companies to go and stay public, which ultimately would benefit investors in those companies.^[127] Finally, to the extent that these accommodations contribute to a company choosing to go or stay public, we also believe that is ultimately a benefit to investors, including through the resulting greater diversification and more efficient capital allocation within investor portfolios.^[128]

A. Large Accelerated Filer Status Amendments

We are proposing to revise the definition of LAF to mean an issuer that as of the end of each of the issuer's two most recent second fiscal quarters, had an aggregate worldwide market value of the voting and non-voting common equity held by non-affiliates of $2 billion or more. In addition, we are proposing to extend the seasoning requirement for LAF status such that an issuer would be an NAF until it has been subject to the requirements of section 13(a) or 15(d) of the Exchange Act for a period of at least the preceding 60 consecutive calendar months.^[129] Consistent with our current rules, an issuer would be required to assess its filer status annually, as of the last day of its fiscal year.^[130]

These proposed amendments would apply the LAF requirements to only the largest registrants, which comprise the vast majority of the equity market capitalization in the U.S. public ( printed page 30098) markets, with those companies currently representing approximately 93.5 percent of total market public float.^[131] We believe that registrants with the largest U.S. equity market capitalization have a heightened investor demand for more comprehensive information sooner, and these registrants are likewise the most capable of bearing the costs and burdens of compliance with shorter disclosure deadlines and non-scaled disclosure and other requirements. We estimate these proposed conditions would result in 19.2 percent of existing Exchange Act reporting companies being LAFs, as compared to 35.4 percent today.^[132]

1. Public Float Threshold

We are proposing to raise the public float threshold for purposes of determination of LAF status from $700 million to $2 billion. The Commission has historically looked to public float as a proxy for demonstrated market following ^[133] and used public float in determining filer status and appropriate disclosure requirements and accommodations. When the Commission created the LAF filer status in 2005, it emphasized that “companies with a public float of $700 million or more represent nearly 95 percent of the U.S. equity market capitalization and are more closely followed by the markets and by securities analysts than other issuers,” and that “larger issuers generally have sufficient financial reporting resources and sufficiently robust infrastructures to comply with the [accelerated filing deadlines].” ^[134] We continue to believe that public float is a reasonable indicator of which companies the markets follow most closely.^[135] We further believe that it is most appropriate to subject registrants with the higher public float to non-scaled disclosure requirements. In addition, we believe that companies with a public float of $2 billion or more should be sufficiently resourced to be able to comply with the highest level of burden associated with registration and the obligations of being a public company.

At the time the Commission adopted LAF filer status in 2005, it was estimated that “companies with a public float of over $700 million represent approximately 18 percent of the total number of companies on these markets and nearly 95 percent of the total public float on these markets.” ^[136] We note that since the adoption of the LAF filer status, the $700 million threshold has not been updated. Today, we estimate that the current threshold captures 98.8 percent of total market public float and 35.4 percent of registrants.^[137] We are proposing to raise the threshold to continue to cover the largest registrants and reestablish the relationship to the number of companies covered and total market public float that existed when the filer status was adopted.^[138] We therefore propose to reestablish a public float requirement that would capture nearly 95 percent of total market public float and estimate that setting the threshold at $2 billion would capture approximately 93.5 percent of total market public float, and cover approximately 20 percent of the total number of existing registrants.

Other than the proposed single public float threshold, we are not proposing additional or alternative LAF status determination thresholds, as we believe doing so could complicate the regulatory framework without commensurate benefits.

2. Public Float Determination

We are proposing amendments to the way a registrant determines its public float for purposes of the LAF definition. Under the current rules, a registrant assesses whether it meets LAF status as of the end of each fiscal year based on its public float as of the last business day of an issuer's most recently completed second fiscal quarter, using either the closing price or the average of the bid and ask prices on that day. As a result, a registrant may become an LAF at the end of its fiscal year based on a single day of volatility, even if the registrant's overall public float may quickly stabilize below the threshold. While we recognize that the circumstances in which such swings can cause a shift in filer status may be limited or relatively rare, to the extent they do occur, the consequences can be significant in terms of regulatory burden on affected registrants. To minimize the impact of swings in share price in a limited period or on a single day, the proposed amendments would require that, before a registrant would transition either into or out of LAF status as of the end of its fiscal year, the registrant's public float, calculated based on the average of the registrant's stock price over the last 10 trading days of each of the second quarter of such fiscal year and the immediately prior fiscal year, multiplied respectively by the aggregate worldwide number of shares of the issuer's voting and non-voting common equity held by non-affiliates as of the last day of the issuer's second fiscal quarter of such fiscal year, remain either at or above, or below, the public float threshold.

By requiring that the public float threshold be met (or not met) for two consecutive years, a registrant would change filer status as of the end of its fiscal year only if its public float has been relatively stable consistently either above or below the threshold. This would mean that a registrant, and investors, would always have at least one year of visibility regarding the ( printed page 30099) possibility of a status transition before any transition could occur. The proposed rules also clarify that meeting or not meeting the conditions of LAF status for a single year would not suffice to change filer status from NAF to LAF or vice versa. Thus, once a registrant enters a status, it would remain in that status for at least two years.

The proposed rules also base the calculation each year on the average of the closing prices over the last 10 trading days of the second quarter of the registrant's fiscal year (or, if there is no closing price on a day, the average of the bid and ask prices that day), using the number of shares on the last day of the second quarter of the registrant's fiscal year, in order to address the risk that a single day's market volatility could result in unexpected changes to filer status. An average over 10 trading days would provide at least two calendar weeks of data, which we believe would mitigate the impact of short-term volatility, including spikes and drops in stock price that may be temporary, such as those based on short-term news and events. We are proposing that the number of shares be based on a single date in an effort to simplify the calculation.

Additionally, we believe the proposed transition criteria, by accounting for the potential for volatility, would eliminate the need for distinct criteria for transitioning out of a particular filer status as provided for in the current rules. As the Commission stated when adopting separate transition thresholds for exiting AF or LAF status, the purpose of the transition thresholds “is to avoid situations in which an issuer frequently enters and exits accelerated and large accelerated filer status due to small fluctuations in public float” which could cause confusion for issuers and investors as to the issuer's status.^[139] While we agree that addressing volatility in setting a market price-based threshold should remain an important consideration, the Commission's existing separate thresholds for exiting a filer status have contributed to the complexity of the current rules. Accordingly, we are also proposing to eliminate the separate, lower threshold for exiting LAF status in favor of a definition with a single public float criterion and a two-year lookback determination ( i.e., public float of $2 billion or more for two consecutive fiscal years). While the lower exit threshold was intended to maintain stability in status so that registrants with public floats near the entry threshold do not frequently move in and out of a filer status, we believe requiring the threshold be met in two consecutive years based in each year on a longer calculation window would more meaningfully address these concerns while being easier for registrants to implement and providing earlier notice of a possible change in filer status.

A potential drawback of the two-year lookback is that some registrants that would become LAFs would have to provide non-scaled disclosure even if their public float falls below the LAF threshold for a year. Conversely, a potential drawback for investors is that they would not receive the benefits of non-scaled disclosure following an NAF's single-year increase in public float, as they would with a one-year lookback. However, a registrant remaining “in status” for at least two years before potentially changing to a new filer status could provide more consistency to the disclosure regime and more comparable period-to-period information, to the benefit of both registrants and investors.

To demonstrate how these proposed changes would work in practice, consider a hypothetical NAF that is assessing its annual filer status as of the last day of its fiscal year, or December 31, 2026, for a calendar-year end registrant. Assuming the proposed rules were in effect, if an NAF's public float, as determined by the average stock price over the last 10 trading days of the second quarter of each fiscal year being measured ( i.e., the 10 trading days ending on or before June 30), for fiscal year 2025 was $1.9 billion and for fiscal year 2026 is $2.3 billion, the registrant would remain an NAF for purposes of its December 31, 2026 Form 10-K (filed in 2027) because it crossed the LAF threshold in only one year of the two-year lookback period. That is, when performing the test as of the last day of its fiscal year, the registrant looks back to the last 10 trading days of the second quarter of the fiscal year for each of fiscal year 2026 and 2025, and in the example, it only exceeded the threshold in fiscal 2026. If the registrant then determines that its public float as of the measurement period of the second quarter for fiscal year 2027 is $1.9 billion (dropping back below the LAF threshold), the registrant would remain an NAF as of the end of fiscal 2027. The earliest it could become an LAF would be at the end of its fiscal year 2029 (assuming its public float crosses the LAF threshold for the relevant measurement period of the second quarter for both fiscal years 2028 and 2029), and if so it would be required to comply with the requirements of LAF status beginning with its Form 10-K for fiscal year 2029 filed in 2030.

On the other hand, if that registrant determines its public float for fiscal year 2027 is $2.5 billion (while the fiscal year 2026 public float remains at $2.3 billion as in the example above), it would become an LAF as of the last day of its fiscal year 2027, and would be required to comply with the requirements of LAF status beginning with its Form 10-K for fiscal year 2027 (filed in 2028). If the registrant's public float falls to $1.9 billion as of the relevant measurement period in the second quarter of fiscal year 2028, the registrant would remain an LAF for purposes of its Form 10-K for fiscal year 2028 because its public float will have been below the LAF threshold for only one fiscal year. The earliest it could become an NAF would be as of the end of its fiscal year 2029 (assuming its public float is below the LAF threshold in the relevant measurement period in the second quarters of both fiscal years 2028 and 2029), and if so would be able to transition to NAF status beginning with its Form 10-K for fiscal year 2029, filed in 2030.

As proposed, once a registrant qualifies for a change in filer status, the requirements and any applicable accommodations of the new filer status would apply beginning with the filing of its annual report on Form 10-K for the fiscal year in which the filer status was determined. As a result, the possibility of both entering LAF status and transitioning to NAF status are foreseeable further in advance than is the case currently, allowing companies to more predictably plan their disclosure controls and procedures and associated costs. Similarly, the first time an LAF's public float falls below the LAF threshold (or an NAF's public float rises above the threshold) as of one of its second fiscal quarter ends, investors would know that, even if that trend were to continue, the registrant would be required to file at least one more Form 10-K subject to the LAF disclosure requirements and deadlines (or subject to the NAF disclosure requirements and deadlines, as the case may be).

3. Seasoning

We are proposing to expand the seasoning period for LAFs— i.e., the requisite period after which registrants could potentially qualify as LAFs—to 60 consecutive calendar months from when the registrant became subject to the Exchange Act reporting requirements, ( printed page 30100) with the assessment made as of the last day of its fiscal year.^[140] Under current rules, a registrant must be an Exchange Act reporting company for at least 12 calendar months before it can be classified as an LAF.^[141] In adopting the current 12-calendar month seasoning period, the Commission noted that, along with the public float requirement, the seasoning period was “designed to include the companies that are least likely to find [accelerated deadlines] overly burdensome and where investor interest in accelerated filing is likely to be highest.” ^[142] When the Commission adopted the 12-calendar month seasoning period, it was focused on existing registrants that would become subject to accelerated filing deadlines and recognized that there would be an increased burden for these issuers. Since the adoption of the acceleration of periodic reporting in 2002, Congress and the Commission have expanded the disclosure requirements for registrants, especially for LAFs. Given the additional requirements that apply to LAFs, we believe that a longer seasoning period would be appropriate before a registrant should be required to comply with non-scaled ongoing disclosure and timing requirements.

This change would effectively create a minimum five-year on-ramp for every new registrant, regardless of public float. While we recognize that this five-year on-ramp would, for a small subset of registrants,^[143] delay compliance with respect to non-scaled disclosure requirements, accelerated reporting deadlines, and ICFR auditor attestation as compared to the current rules, we believe allowing all newer registrants ample time to adjust to the disclosure and filing requirements of a public company may encourage more companies to go public and stay public, which may ultimately improve overall market transparency and provide investors with more investment opportunities with the greater transparency afforded by Exchange Act reporting. In addition, even if a particular requirement does not apply to a registrant, that registrant may elect to voluntarily comply, such as by obtaining an ICFR auditor attestation, if the registrant believes it would benefit the registrant to do so, such as if doing so were viewed favorably by investors.

When Congress enacted the JOBS Act, in order to encourage more companies to go and stay public, it created an on-ramp of up to five years in EGC status, reducing registrants' compliance burdens in their early years as public companies. In our experience, this on-ramp has been a meaningful accommodation to newer public companies and generally has not resulted in investor protection concerns.^[144] A similar on-ramp before a registrant would potentially enter LAF status would be consistent with and effectively expand the benefits of EGC status, and would provide all newer registrants ample time to, among other things, prepare for the increased costs and reporting burdens on company staff and enlist third party advisors or service providers needed to satisfy the non-scaled disclosure requirements and accelerated reporting timelines. Finally, providing a sixty calendar month on-ramp complements Congress' intent with its establishment of EGC status and would help to simplify filer status determinations by ensuring that all registrants that meet the statutory definition of EGCs will necessarily qualify as NAFs when making their filer status determinations.^[145]

Request for Comment

(1) Does public float continue to be a reasonable indicator of which companies the markets follow most closely? Does public float continue to be a good indicator of the most significant need for more extensive public disclosure? Why or why not? As an alternative, in view of the increasing prevalence of dual class share structures, should non-publicly traded common equity securities held by non-affiliates through dual class share or other multi-class share structures be included in determining whether the threshold is met? If so, how should registrants determine the value of those securities for purposes of the determination?

(2) Does public float provide a reasonable indicator of a registrant's ability to sustain the burdens associated with LAF status under the proposed rules, including non-scaled disclosure requirements, accelerated reporting timelines, and compliance with the ICFR auditor attestation requirement in section 404(b)? If not, are alternative thresholds or other measures more appropriate to evaluate a registrant's ability to sustain the burdens of being an LAF?

(3) Is the proposed LAF threshold of $2 billion in public float, which would capture approximately 93.5 percent of the total market public float and would result in approximately 20 percent of existing public companies being classified as LAFs, appropriate? If not, what other threshold should the Commission consider and why? For example, should the Commission update the threshold to $3.85 billion to mirror the increase in the S&P 500 Index? Do the proposed changes to the LAF status public float threshold and calculation methodology appropriately balance the goals of capital formation and investor protection? Should the Commission instead adopt a different threshold, and if so, what? Would the proposed approach result in any impacts to investors and the public market, including benefits or burdens that might result from the proposed scaling of disclosure associated with the revisions to the filer status categories? Would the proposed approach impact investors' ability to make informed investment and voting decisions?

(4) We have proposed to adjust the public float threshold not based on inflation, but rather to cover the registrants that comprise the vast majority of the total market public float and that are most able to comply with the highest level of burden associated with registration. Should the Commission instead update the current threshold for inflation? Alternatively, should the Commission establish a mechanism to update the proposed $2 billion public float threshold for inflation? For example, the JOBS Act requires that the revenue threshold in definition of EGC be indexed to inflation at five-year intervals. Should the proposed public float threshold be similarly indexed to inflation? Are there alternative methodologies for updating the threshold that would be preferable? ( printed page 30101)

(5) Would the proposed average public float calculation period (consisting of the registrant's stock price over the last 10 trading days of the second quarter of each relevant fiscal year) and the proposed use of the number of shares held by non-affiliates as of the last day of the second fiscal quarter achieve the intended goal of avoiding a result where a company's public float determination is anomalous due to short-term volatility? Why or why not? Should it be more or fewer than 10 trading days? Should the number of shares be based on the average number of shares during the same 10 trading day period instead of at the last day of the second fiscal quarter or should the number of shares be based on the number of shares as of a date selected by the registrant within a given period (such as any date within the last 10 trading days of the second fiscal quarter)? Why or why not? Are there costs or benefits associated with extending the public float calculation methodology to 10 trading days?

(6) We considered multiple calculation windows for the public float calculation, including: retaining the existing calculation date of the last trading day of the second fiscal quarter; allowing a registrant to choose a date within a given period (such as any date within the last 10 trading days of the second fiscal quarter); or reducing the number of days comprising the average to, for example, the last five trading days of the second fiscal quarter. Are any of these or other alternatives preferable to the proposed 10-day average methodology, and if so, why?

(7) Is the proposed LAF threshold effective for all types of issuers, or should the threshold differ for certain types of issuers? For example, should LAF status for investment companies ( i.e., BDCs and face-amount certificate companies) use a different public float threshold, a different seasoning period, or a different approach altogether ( e.g., a threshold based on assets or annual investment income)? If so, what threshold would be appropriate for investment companies?

(8) Is a 60-calendar month on-ramp (seasoning period) before LAF status can attach to a registrant appropriate? Would this create a beneficial on-ramp for newer public companies before they could be subject to LAF status? Would a shorter period, such as 24 calendar months, or no seasoning period at all, be more appropriate considering that public companies that meet the proposed public float threshold to be an LAF likely have the resources to comply with the more extensive requirements? Do the very largest new registrants need a 60-calendar month seasoning period, or should certain registrants be required to comply with LAF requirements sooner? If a seasoning period is adopted, should the largest new registrants nevertheless be required to comply sooner with certain of the LAF requirements, such as auditor attestation on ICFR? If so, what would be an appropriate time period for such registrants? Are the proposed mechanics around assessment of the seasoning period sufficiently clear, or would any modification to the proposed amendments or any clarifying guidance be needed?

(9) In order to minimize variation in disclosure obligations and ensure a level of predictability, the proposal contemplates a two-year period after transitioning into or out of LAF status during which a registrant's filer status cannot change. Should we adopt this two-year minimum period, as proposed? Would this have the intended effect of providing registrants and investors with some consistency and predictability as to the disclosure and other requirements a registrant is subject to? Is comparability with respect to a registrant's disclosure over a two-year (or longer) period an important consideration for investors? Would another period be more appropriate? Alternatively, should we consider other ways of addressing these concerns? For example, under the current rules a registrant must fall below a separate, lower threshold to exit AF status than to enter that status; should we retain this approach? If so, why and what lower threshold would be appropriate for exiting LAF status?

(10) Are there any other issues relating to filer status transitioning that the Commission should clarify or address in any final rules? For example, if a registrant deregisters its securities and later re-enters the reporting system, should that registrant be considered a new registrant for purposes of the 60-calendar month seasoning period?

(11) When an issuer qualifies for a new filer status, which under the proposal would only happen at the end of a fiscal year, should the requirements and/or accommodations of that new status apply to the issuer beginning with the annual report for the fiscal year in which the change in filer status occurred, as proposed? Should issuers have the option to apply a change in filer status earlier than as proposed?

B. Non-Accelerated Filer Amendments

We are proposing to define “non-accelerated filer” to mean an issuer ^[146] that is not an LAF. As proposed, every registrant would be an NAF beginning at the time of its initial public offering or registration and for at least five years following, as a result of the proposed 60 consecutive calendar months on-ramp requirement before a registrant could become an LAF. An issuer would then remain an NAF unless and until it had an aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates, or public float, of at least $2 billion for two consecutive years. After an NAF qualifies as an LAF and thereby loses its NAF status, it could regain its NAF status if its public float is less than $2 billion for two consecutive years.

We also propose to extend to NAFs the disclosure requirements and other accommodations currently applicable to SRCs and EGCs.^[147] While we estimate that the proposed NAF filer status would account for approximately 81 percent of reporting companies currently, they would account for only 6.5 percent of total market public float. We therefore believe it is appropriate and in the public interest to leverage the accommodations and requirements that have been effective for registrants that are currently SRCs and/or EGCs, which compose over 52 percent of current registrants, in resetting our disclosure framework to be better tailored to market following. We anticipate that this change will help rebalance the costs and benefits associated with public company status with the intention of facilitating more companies going and staying public, which will ultimately increase transparency in the market to the benefit of investors, while still maintaining investor protections. We further anticipate that reducing the burdens of periodic disclosure may enable management teams to better focus on business operations.^[148]

We recognize that this approach will result in the loss of some information, loss of auditor attestation of ICFR, and longer reporting deadlines for certain registrants that currently qualify as ( printed page 30102) LAFs or AFs but would qualify as NAFs under the proposed rules. However, we believe that the material information necessary for investors to make sound investment and voting decisions will continue to be required from and provided by NAFs under the proposed rules. NAFs would also continue to be subject to annual, other periodic and current reporting requirements, including required disclosure of audited financial statements as well as MD&A of the registrant's financial condition and results of operations, and management's assessment of and report on the effectiveness of the registrant's ICFR, which would continue to provide transparency to investors and assist them in making informed investment and voting decisions.

1. Non-Accelerated Filer Definition

Under the current rules, the term “non-accelerated filer” is not defined. The term is used informally and widely to refer to a registrant that is neither an LAF nor an AF, which typically means a registrant with under $75 million in public float.^[149] Currently, an NAF can also be an SRC, an EGC, or both. We are proposing to define a new regulatory category termed “non-accelerated filer,” which we propose to define in Securities Act Rule 405 and Exchange Act Rule 12b-2 as “an issuer that is not a large accelerated filer.” As a result, the default status for any Exchange Act reporting company (other than asset-backed issuers, pursuant to an exception we are proposing in Rule 405 and Rule 12b-2) would be an NAF; until a company meets the proposed new conditions for becoming an LAF, it would remain an NAF.^[150] In addition, under the proposed rules, NAFs would be subject to essentially the same requirements and accommodations that are applicable to SRCs and EGCs under the current rules.^[151] By expanding NAF filer status under the proposed amendments, more registrants would qualify as NAFs and therefore would not be required to comply with the ICFR auditor attestation requirement.^[152]

With these amendments, we further propose to eliminate the “accelerated filer” ^[153] and “smaller reporting company” ^[154] categories, and the corresponding definitions in Item 10 of Regulation S-K,^[155] Rule 405,^[156] and Rule 12b-2,^[157] since they will no longer be necessary given the expansion of NAF status.^[158] Because the proposed amendments would extend to NAFs the disclosure accommodations currently available to EGCs, the proposed amendments would generally make separate reliance on those JOBS Act provisions ^[159] for EGCs unnecessary.^[160]

The proposed changes would establish a clearly demarcated on-ramp for registrants to grow and gain experience as reporting companies before becoming subject to the more detailed and expansive disclosure obligations applicable to LAFs. As noted above, the Commission has long considered how best to apply a disclosure regulation framework to companies that vary widely in size and resources to comply with complex securities laws and rules. During its history, the Commission has established various categories, such as “small business issuers,” “smaller reporting companies,” and “accelerated filers,” in tailoring disclosure and reporting requirements based on the needs of investors with an awareness of the potential burdens associated with registrants' ability to comply with those requirements. In the JOBS Act, Congress similarly sought to address some of these concerns for newly public companies by establishing the EGC filer status and reaffirmed the need for the Commission to consider ways to further streamline the requirements for the benefit of new and smaller companies in the FAST Act.^[161] Accordingly, we believe that the consolidation of SRC and EGC accommodations into a single regulatory filer status and the elimination of the AF status as a standalone status is in the public interest and consistent with the protection of investors.

The proposed amendments would transform what is currently a layered and complex set of filer statuses into a more streamlined structure, with the ( printed page 30103) intent of simplifying the regulatory scheme. Registrants would no longer need to assess each year multiple filer status entry and exit thresholds, many of which are overlapping and often have inconsistent lines distinguishing one set of requirements from the next.

In addition, the expanded category of NAFs would be subject to fewer of the costly requirements that currently apply to LAFs and AFs. As discussed in more detail in the sections that follow, for example, NAFs would be permitted to rely on Article 8 of Regulation S-X for scaled financial disclosure and provide only two (instead of three) years of audited financial statements in their annual reports and registration statements, would be permitted to comply with scaled executive compensation disclosure requirements, and would not be subject to the ICFR auditor attestation requirement.^[162] As a result, we expect that NAFs would have reduced costs of compliance compared to LAFs and would have ample notice to prepare for accelerated filing, additional disclosure, and required auditor attestation of ICFR should they transition to LAF status.

We recognize that the proposed expansion of NAF status and application of EGC and SRC disclosure requirements would result in reduced disclosure for many registrants and their investors. While that reduction in disclosure may result in costs to investors, both investors and registrants may also benefit from more companies choosing to register their securities or to continue as public companies. This would provide more public market investment opportunities that would be subject to robust disclosure requirements, which provide greater transparency as compared to private markets. In addition, and as discussed in more detail in sections IV and V below, we believe investors and registrants would benefit from a more easily understandable filer status framework that imposes fewer compliance costs, the ultimate burdens of which are borne by a registrant's shareholders. Moreover, as discussed in more detail in section IV below, we estimate that the proposed changes would apply to registrants representing approximately 6.5 percent of total market public float, while registrants representing approximately 93.5 percent of total market public float would remain subject to LAF reporting requirements. We believe this focus on ensuring that the registrants that represent the vast majority of the market continue to comply with the most extensive requirements mitigates investor protection concerns with the proposed amendments.

2. ICFR and the Auditor Attestation Requirement

One significant effect of the proposed amendments would be a decrease in the number of registrants required to obtain an auditor attestation of management's assessment of the effectiveness of the company's ICFR. Sarbanes-Oxley Act section 404(b) requires the auditor that prepares or issues the issuer's audit report (other than for EGCs) to attest and report on management's assessment of the effectiveness of ICFR; however section 404(c) exempts registrants that are not LAFs or AFs from the ICFR auditor attestation requirement. By increasing the upper bound of NAF status from less than $75 million (or less than $700 million if revenues are less than $100 million) to less than $2 billion, the proposed amendments would expand by 26.7 percent the number of current registrants that would qualify as NAFs and would therefore not be subject to an ICFR auditor attestation requirement.^[163] Additionally, with respect to newly public companies, the proposed minimum five-year on-ramp (60 calendar months) before entering LAF status would allow these companies additional time to adjust to being a public company before potentially being exposed to ICFR auditor attestation costs. This in turn may incentivize some companies to go public sooner, which could open to investors additional opportunities for investments that might otherwise have stayed in the private market or which some investors may not have otherwise been able to access.

As noted, under the proposal, NAFs would remain subject to the Commission's rules under section 404(a), which require management to establish, state its responsibility to establish and maintain, and provide its assessment of, the registrant's ICFR.^[164] NAFs would also continue to be required to obtain a financial statement audit by a registered public accounting firm ^[165] in which the auditor is required to obtain an understanding of ICFR as part of its risk assessment procedures.^[166] Obtaining an understanding of ICFR includes evaluating the design of controls that are relevant to the financial statement audit and determining whether the controls have been implemented.^[167] Additionally, the auditor may test the operating effectiveness of certain internal controls in connection with the financial statement audit.^[168] These procedures to obtain an understanding of ICFR and test the operating effectiveness of controls in connection with the financial statement audit may identify deficiencies in the registrant's ICFR. Moreover, the auditor may identify such deficiencies when performing substantive procedures in a financial statement audit. The auditor is required to communicate in writing to management and the audit committee all significant deficiencies and material weaknesses identified during the financial statement audit,^[169] which may in turn require consideration by management in connection with management's assessment of ICFR under section 404(a).

The Commission has recognized the benefits of ICFR auditor attestation in enhancing the reliability of management's assessment of ICFR and the registrant's financial statements. ^[170] ( printed page 30104) The auditor's attestation can help registrants identify and disclose, on a timely basis, material weaknesses in ICFR, maintain their focus on effective internal controls, and, ultimately, mitigate the need for subsequent restatements of financial statements due to misstatements that were not prevented or detected, on a timely basis, by the registrant's internal controls.^[171] Any resulting increase in the effectiveness of ICFR enhances the quality of the registrant's financial statements which investors rely upon to make informed investment and voting decisions. The Commission has also remained cognizant of the significant costs and burdens that are associated with section 404(b) compliance.^[172] Some commenters on the 2019 Accelerated Filer Release stated to the Commission that the ICFR auditor attestation is the most costly aspect of being an AF.^[173] Supporting these assertions, in a June 2025 report to Congress the GAO found that section 404 compliance costs are more burdensome in relative terms for smaller companies.^[174]

In proposing to increase the LAF public float threshold, we recognize that many issuers would no longer be subject to the ICFR auditor attestation requirement of section 404(b) and that this would likely result in a loss of the benefits of auditor attestation in enhancing the reliability of management's assessment of ICFR and improving the reliability of financial statements. For example, a number of commenters to the 2019 Accelerated Filer Release indicated that ICFR auditor attestation requirement promotes effective ICFR and more accurate disclosures related to ICFR.^[175] Additionally, investors may factor in whether a company voluntarily obtains ICFR auditor attestation in weighing their investment and voting decisions with respect to individual companies.

On balance, we believe increasing the LAF threshold and the resulting change in the number of companies subject to the ICFR auditor attestation requirement are appropriate given the significant relative cost burden of this requirement, particularly to smaller registrants. The expected reduction in costs to those registrants, as well as related effects of the proposal that may encourage more companies to go and stay public, ultimately would benefit investors in those companies. However, the proposed amendments would also allow registrants flexibility to decide to obtain and disclose the results of such auditor attestation, even if not required, for example if the registrant believes the benefits it would derive from such auditor attestation would justify its costs. We believe that the ICFR auditor attestation requirement change, along with the other changes we are proposing, would incentivize companies to access the public markets, register their securities offerings, and continue as public companies, which in turn would expand investment opportunities benefiting investors and the public markets.^[176] Accordingly, we believe these factors weigh in favor of the proposed amendments, which we find to be in the public interest and consistent with the protection of investors.

3. Extension of SRC and EGC Accommodations and Disclosure Requirements

a. Application of SRC Accommodations

The Commission has long been cognizant of the burdens of registration and reporting under the securities laws, particularly as those burdens apply to smaller registrants. In the 1990s, the Commission developed an integrated disclosure system tailored specifically to smaller issuers,^[177] and in the 2000s, the Commission replaced that system with a series of accommodations for SRCs.^[178] As part of our effort to simplify and further rationalize disclosure responsibilities for registrants, we are proposing to permit registrants that meet the proposed NAF status to comply with the disclosure requirements and accommodations currently applicable to SRCs.^[179] The current SRC-level disclosures would become the default disclosure requirements for most registrants.

While we are proposing to increase the number of registrants permitted to provide SRC scaled disclosure from approximately 44 percent of registrants to approximately 81 percent,^[180] the proportion of total market public float represented by this population of registrants would remain relatively small (approximately 6.5 percent). The proposal would reduce the compliance burdens of regulation for all of these small- to mid-capitalization registrants. This would benefit those registrants and their investors by lowering expenses and thereby freeing up capital that could be used to invest in the registrant's business. Further, the lower expenses associated with registration may further encourage such registrants to seek access to the public markets and remain public, which also benefits investors by providing more investment opportunities with the greater transparency afforded by Exchange Act reporting.

i. Scaled Disclosures Under Regulation S-K and Other Accommodations

Under the proposal, registrants that qualify as NAFs would be permitted to follow the current SRC disclosure requirements, which is scaled disclosure compared to that required of LAFs, to include: ^[181]

• More limited description of business; ^[182]

( printed page 30105)

• Two (instead of three) years of MD&A pursuant to17 CFR 229.303 (“Item 303 of Regulation S-K”); ^[183]

• Two (instead of three) years of summary compensation table information pursuant to17 CFR 229.402 (“Item 402 of Regulation S-K”); and
• Executive compensation disclosure regarding three (instead of five) named executive officers pursuant to Item 402 of Regulation S-K.^[184]

Registrants that qualify as NAFs would also be permitted to forgo the following disclosures that are not currently applicable to SRCs:

• Risk factor disclosure in Forms 10-K and 10-Q pursuant to Item 1A of Form 10-K and Item 1A of Form 10-Q;
• Performance graph disclosure pursuant to17 CFR 229.201(e) (“Item 201(e) of Regulation S-K”), except in the case of NAFs that are investment companies; ^[185]

• Supplementary financial information pursuant to17 CFR 229.302(a) (“Item 302(a) of Regulation S-K”); ^[186]

• Quantitative and qualitative disclosures about market risk pursuant to17 CFR 229.305 (“Item 305 of Regulation S-K”); ^[187]

• Compensation discussion and analysis, compensation policies and practices related to risk management,^[188] pay ratio disclosure,^[189] and specified executive compensation disclosure tables, including grants of plan-based awards table, pension benefits table, option exercises and stock vested table, and nonqualified deferred compensation table pursuant to Item 402 of Regulation S-K; ^[190]

• Policies and procedures for the review, approval, or ratification of related party transactions pursuant to17 CFR 229.404(b) (“Item 404(b) of Regulation S-K”); ^[191]

• Compensation Committee Interlocks and Insider Participation disclosure, and Compensation Committee Report disclosure pursuant to17 CFR 229.407(e)(4) and (e)(5); ^[192]

• Audit committee financial expert disclosure in a registrant's first annual report; ^[193] and

• Certain payments made by resource extraction issuers pursuant to17 CFR 240.13q-1.

By contrast, while current Item 404 includes an accommodation permitting SRCs to exclude disclosure relating to the review, approval, or ratification of related party transactions in accordance with Item 404(b) as noted above, it also includes several requirements that are more rigorous for SRCs. Among other things, Item 404(d) provides a different, more rigorous threshold for disclosure by SRCs of the lesser of $120,000 or one percent of the average total assets at year-end for the last two fiscal years when determining reportable transactions with related persons under Item 404(a). Non-SRC registrants are only required to look to whether the amount of the transaction exceeds $120,000. In addition, SRCs are required to disclose a list of all parent companies showing the basis of control and as to each parent, the percentage of voting securities owned or other basis of control by its immediate parent pursuant to Item 404(d)(3). Rather than apply such requirements to NAFs, we are proposing to remove Item 404(d) and would not apply the additional requirements that currently apply to SRCs to all NAFs.

We are proposing to require disclosure of material unresolved staff comments by all issuers. Currently, if a registrant that is an AF, LAF, or well-known seasoned issuer has received written comments from the Commission staff regarding its periodic or current reports and these comments remain unresolved, the registrant is required to disclose the substance of any material unresolved comments on Form 10-K or Form 20-F.^[194] Staff review and comment could serve an important investor protection function. As a result, we believe it is appropriate to require NAFs to also provide this disclosure to investors.

Additionally, as noted above, in conjunction with this release, the Commission is proposing reforms to the securities offering process to make Form S-3 and the ability to conduct shelf offerings, including automatic shelf offerings, available to significantly more issuers.^[195] Because these offerings, which often incorporate by reference information from a registrant's current and periodic reports, would be available to more issuers, including NAFs, we believe that investors in those issuers should be made aware of the substance of any material unresolved comments. Accordingly, we are proposing to amend Item 1B. of Form 10-K and Item 4A of Form 20-F ^[196] to require all registrants to disclose material unresolved comments received at least 180 days before a registrant's fiscal year end.^[197] Under the proposal, in any Form 10-K or 20-F filing, if a registrant has ( printed page 30106) received written comments from the Commission staff regarding its periodic or current reports under the Exchange Act ( e.g., Form 10-K, 10-Q, or 8-K for domestic filers, or Form 20-F or 6-K for FPIs) not less than 180 days before the end of its fiscal year to which the Form 10-K or 20-F relates, and the comments remain unresolved, the registrant would be required to disclose the substance of any unresolved comments that the registrant believes are material and may provide other information including the position of the registrant with respect to any unresolved comment.

ii. Scaled Financial Statement Requirements Under Regulation S-X

Under the current rules, Article 8 provides the form and content requirements of financial statements of SRCs. We propose to provide that NAFs may prepare their financial statements in accordance with Article 8 of Regulation S-X,^[198] except for NAFs that are BDCs or face-amount certificate companies, which would receive certain of the same accommodations under proposed Rule 3-19 of Regulation S-X. NAFs that are not investment companies would be permitted to:

• Apply the form and content requirements of Article 8, with a few limited exceptions as specified in Rule 8-01,^[199] permitting registrants to not comply with certain form and presentation requirements related to the financial statements,^[200] and to not disclose certain financial statement schedules and certain general notes to the financial statements, and to not provide separate financial statements of majority-owned subsidiaries not consolidated and 50 percent or less owned persons accounted for by the equity method of accounting otherwise required by Regulation S-X; ^[201]

• Provide two rather than three years of audited statements of comprehensive income, cash flows, and changes in stockholders' equity pursuant to Rule 8-02;
• Provide a slightly more condensed format for interim financial statements, financial statements for businesses and real estate operations acquired or to be acquired, and pro forma financial statements pursuant to Rules 8-02 through 8-06; and
• Apply less stringent age of financial statements requirements pursuant to Rule 8-08.

We are proposing the following additional changes to Article 8 in connection with these amendments in order to clarify or streamline certain of the requirements.^[202] First, we are proposing to revise Rule 8-01(b) to require NAFs to comply with 17 CFR 210.4-01(a), which, among other things, requires that a registrant provide “such further material information as is necessary to make the required statements, in light of the circumstances under which they are made, not misleading.” We believe this proposal is necessary as we recognize that every NAF's circumstance is unique and therefore there may be certain aspects of an NAF's business that are material, but are not addressed by a disclosure requirement explicitly contemplated by Article 8, and this proposal would require that disclosure.

We are also proposing to revise Article 8 to clarify the applicability of requirements for NAFs to disclose summarized financial information of subsidiaries not consolidated and 50 percent or less owned persons accounted for by the equity method of accounting, which we refer to as “equity investees.” ^[203] Currently, Rule 8-03(b)(3) requires disclosure of summarized statement of comprehensive income information in an SRC's interim financial statements for equity investees that constitute 20 percent or more of a registrant's consolidated assets, equity, or income from continuing operations attributable to the registrant. Article 8 does not explicitly include a requirement for SRCs to disclose summarized information on an annual basis, while 17 CFR 210.4-08(g) (“Rule 4-08(g)”) does require annual period summarized financial information to be disclosed for equity investees of registrants other than SRCs. Commission staff have historically analogized to Rule 8-03(b)(3) and requested disclosure of annual summarized information from SRCs if it is not otherwise included. We are proposing to clarify the applicability of the annual period disclosure requirement by revising Rule 8-01 to require that NAFs provide summarized financial information required by Rule 4-08(g). As proposed, an NAF would be required to disclose, in the notes to audited annual financial statements, summarized balance sheet and statement of comprehensive income information of equity investees.^[204]

( printed page 30107)

We are also proposing to align the tests and thresholds used to determine when disclosure would be required by NAFs to reflect current practice and staff guidance for SRCs. Currently, disclosure is required when the conditions ( i.e., significance tests) specified in the investment, income, and asset tests in the definition of “significant subsidiary” in 17 CFR 210.1-02(w) (“Rule 1-02(w)”) are met for any individual equity investee or combination of equity investees,^[205] using the higher 20 percent threshold currently required under Article 8.^[206] We believe revising Rule 8-01 to provide that NAFs are required to provide summarized financial information in annual periods in accordance with Rule 4-08(g), but applying the existing 20 percent threshold in Article 8, would provide for appropriate disclosure from NAFs, codify certain existing SRC practice and staff guidance for registrants that rely on Article 8, and help to clarify the disclosure requirements.^[207] Further, we do not believe these proposed revisions would represent a significant change in practice from that currently applied by SRCs.

We are further proposing to revise Rule 8-03(b)(3) to align the significance tests used to determine when disclosure of summarized statement of comprehensive income information by NAFs is required in interim periods with those used by LAFs under 17 CFR 210.10-01(b)(1) (“Rule 10-01(b)(1)”). Currently, three significance tests are used to determine whether disclosure of summarized information regarding a 50 percent or less owned person accounted for by the equity method of accounting is required in an interim period by an SRC under Rule 8-03(b)(3) as compared to only two tests applicable to a non-SRC under Rule 10-01(b)(1).^[208] As a result disclosure is more likely to be required under Rule 8-03(b)(3) for SRCs than under Rule 10-01(b)(1) for non-SRCs. We do not believe NAFs should be required to disclose such summarized information in more instances than LAFs and are proposing to treat NAFs and LAFs consistently.^[209]

Finally, we are proposing to remove and reserve 17 CFR 210.8-07 (“Rule 8-07”) relating to Limited Partnerships. This disclosure is not required by LAFs and does not appear to be necessary for NAFs. We do not believe that the disclosure requirements for NAFs should be more rigorous than those for registrants that are not NAFs, unless there is specific need for the material disclosure to be provided to investors. The disclosure required by Rule 8-07 has been required for over 30 years by different rules, but we do not believe that a dedicated disclosure requirement for NAFs continues to be necessary because the currently applicable disclosure requirements for all registrants result in sufficient disclosure about limited partnerships to investors.^[210] Furthermore, to the extent considered necessary or appropriate for the protection of investors, the Commission could require the filing of other financial statements, including the audited balance sheet of the general partner.^[211]

In proposing to apply the SRC disclosure requirements to NAFs, we considered the current use and efficacy of the SRC disclosure requirements and the overall impact of expanding the use of such disclosure requirements to more registrants. Currently, SRCs compose a significant portion of the number of all Exchange Act filers, 48.6 percent in calendar year 2024.^[212] Since adoption of the SRC rules in 2007, and expansion of the SRC public float threshold to $250 million in 2018 and revising the revenue test to include issuers with annual revenues of less than $100 million and public float of less than $700 million, we are not aware of any significant concerns regarding the scaled disclosure requirements or that the disclosure made by SRCs falls short of the informational needs of investors. We also note that while SRCs are only required to provide two years of financial statements in their periodic reports and registration statements, for ( printed page 30108) any registrant that has been providing disclosure for more than one year, historical financial information concerning prior years is readily available on the Commission's Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”).

We are not proposing to permit investment companies that are NAFs to rely on Article 8. Investment companies historically have been excluded from the SRC definition and, therefore, Article 8 has not been available to them. For financial reporting purposes, investment companies are subject to the rules set forth in Articles 6 and 12 that are specifically designed for RICs and BDCs and that recognize differences between investment company registrants and non-investment company registrants. For example, investment companies invest in securities principally for returns from capital appreciation and/or investment income. Investment companies also are required to value their portfolio investments, with changes in value recognized in the statement of operations for each reporting period. The Commission has previously taken steps to tailor financial reporting for investment companies, including BDCs.^[213]

Permitting BDCs and face-amount certificate companies that are NAFs to prepare their financial statements in accordance with the same Article 8 provisions that apply to other NAFs would reduce the availability of information that is important for understanding these investment companies' activities and investments, such as the schedules of investments that they currently prepare under Article 12 of Regulation S-X. This approach would also create disparities between financial reporting by BDCs and face-amount certificate companies and financial reporting by other similarly-situated RICs. For these reasons, we are not proposing to permit BDCs and face-amount certificate companies that are NAFs to rely on Article 8, which includes provisions allowing more condensed financial statements without financial statement schedules ( e.g., the schedule of investments) or certain general notes to the financial statements.

We are, however, proposing to allow BDCs and face-amount certificate companies that are NAFs to have certain of the same accommodations included in Article 8 under proposed Rule 3-19. This proposed rule would allow BDCs and face-amount certificate companies that are NAFs to elect to provide, for their annual financial statements, two rather than three years of statements of operations and cash flows similar to provisions available to other NAFs under proposed Rule 8-02. Extending this provision to BDCs and face-amount certificate companies that are NAFs would not create disparities with reporting by other RICs, as other RICs similarly are not required to provide financial statements covering a three-year period. In addition, as discussed below, the proposed rule would allow BDCs and face-amount certificate companies that are NAFs to defer adoption of certain new or revised financial accounting standards to the same extent as other NAFs. This option to defer compliance is currently available to BDCs that are EGCs, so this proposed change would extend the accommodation to defer compliance to additional BDCs and to face-amount certificate companies.^[214] Finally, proposed Rule 3-19 would extend certain time periods in Article 3 for BDCs and face-amount certificate companies that are SNFs to account for the additional time that SNFs would have to file periodic reports, consistent with similar provisions under Article 8 for SNFs. Overall, proposed Rule 3-19 for BDCs and face-amount certificate companies that are NAFs is designed to mitigate regulatory burden for BDCs and face-amount certificate companies that qualify as NAFs under the proposal, while recognizing differences in the operations and structures of these investment companies in comparison to other NAF issuers.

b. Application of Certain EGC Accommodations

While the Commission has reevaluated its regulatory regime and adopted rules in the past to address the burdens of registration and reporting on smaller registrants, Congress has also acted to direct the Commission to further consider and address regulatory burdens, as discussed in more detail in section I above. In 2012, the JOBS Act established “emerging growth companies” as a filer category entitled to substantial regulatory relief. In establishing EGC conditions permitting eligibility for that status for up to the first five years after the registrant completes an initial public offering of common equity securities, until the registrant reaches $1 billion in total annual gross revenues (indexed for inflation), issues $1 billion in non-convertible debt over a three-year period, or becomes an LAF,^[215] Congress significantly raised the company size at which disclosure and other accommodations are provided to smaller and emerging registrants.

While there are overlaps between the EGC and SRC accommodations, EGCs are entitled to a similar but distinct set of accommodations as compared to SRCs. Under existing rules, EGCs are exempt from the ICFR auditor attestation requirement, and are permitted to provide executive compensation disclosure using the rules applicable to SRCs and to provide two (instead of three) years of financial statement disclosure in an initial public equity offering. An EGC that also qualifies for SRC status ^[216] would therefore receive certain incremental additional benefits from its EGC status.

As part of our effort to simplify and further rationalize disclosure responsibilities for registrants, we are proposing to permit NAFs to apply the disclosure requirements and accommodations currently applicable to EGCs (except as described below with regard to section 6(e)(2) of the Securities Act), in addition to those currently applicable to SRCs. Under the proposed rules registrants that qualify as NAFs would receive the incremental accommodation of being permitted to forgo the following disclosures and other requirements currently available to EGCs:

• Provision of a registered public accounting firm's attestation report on the registrant's ICFR (“Item 308(b) of Regulation S-K”); ^[217]

• Payversus performance disclosure pursuant to 17 CFR 229.402(v); and ( printed page 30109)
• Shareholder advisory votes ^[218] on executive compensation (“say-on-pay”),^[219] the frequency of say-on-pay votes,^[220] and golden parachute compensation in connection with mergers and acquisitions and related disclosure.^[221]

In addition to these disclosure and other accommodations, the JOBS Act amended the Securities Act by adding section 6(e) ^[222] to provide EGCs with: (1) the ability to submit to the Commission a draft registration statement (“DRS”) for confidential review prior to an EGC's initial public offering; ^[223] and (2) confidentiality regarding an EGC's nonpublic DRSs submitted prior to its initial public offering date from being produced by the Commission in response to a FOIA request.^[224]

The staff of the Division of Corporation Finance have accepted draft registration statements for non-public review for all issuers since 2017 ^[225] and subsequently further expanded the availability of the non-public review process.^[226] We are not proposing to codify this process but we request comment on whether doing so would provide additional clarity and certainty. With respect to the provision of confidentiality under section 6(e)(2) of the Securities Act, the Commission lacks the authority to extend this confidentiality to non-EGC companies and therefore only statutory EGCs will remain eligible for this accommodation. Non-EGC registrants would continue to be able to use the Commission's confidential treatment procedures regarding FOIA requests pursuant to 17 CFR 200.83 (“Rule 83”), when submitting draft registration statements for nonpublic review. The Commission's Rule 83 confidential treatment procedures allow Commission staff to determine whether, in response to a FOIA request, nonpublic draft registration statements and related correspondence are subject to a FOIA exemption and consequently would not be disclosed in response to a FOIA request.^[227]

EGCs are additionally permitted to elect to defer compliance with new or revised financial accounting standards issued by the Financial Accounting Standards Board (“FASB”) until such time as a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act) is required to comply with such standards, if such standard applies to companies that are not issuers.^[228] We believe that all newly public companies should benefit from this accommodation as part of an on-ramp for public companies.^[229] We are therefore proposing to accord all NAFs the option to elect this deferred compliance, but only for their first five years after initial registration with the Commission.^[230] This means that for an NAF that elects this accommodation, for its first five years after initial registration with the Commission, the NAF would defer compliance until such time as a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act) is required to comply with such standards. We are not proposing to provide NAFs with the ability to make this election more than five years after their initial registration with the Commission because doing so would limit the effectiveness of the FASB's bifurcation of public company and private company compliance dates.^[231]

( printed page 30110)

As proposed, the election would be irrevocable; NAFs electing not to use this accommodation would be required to forgo this accommodation for all financial accounting standards and would not be permitted to rely on this accommodation in any future filings. As proposed, this accommodation would cease on the last day of the fiscal year of the NAF in which the fifth anniversary of the NAF's initial registration effective date occurs. The annual report for that fiscal year would be required to reflect the adoption of all new or revised financial accounting standards that are effective for issuers as of that date. For example, an issuer with a calendar year-end whose initial public offering registration statement became effective on April 10, 2026 would cease to be able to rely on this accommodation on December 31, 2031, and the Form 10-K for that fiscal year, filed in 2032, would be required to include audited financial statements reflecting the adoption of all financial accounting standards that are effective for issuers as of that date. In proposing to permit NAFs to use the disclosure requirements and accommodations currently available to EGCs, we considered the potential costs to investors from the loss of information and of certain shareholder advisory votes with respect to these registrants. Similar to our analysis relating to the extension of SRC accommodations,^[232] we believe that extending certain EGC accommodations to NAFs would provide a significant benefit to registrants and investors by simplifying the current complex filer status framework and reducing the costs of being or becoming a public company. We believe reducing such costs would free up capital that could be invested in the registrant's business, potentially enhancing shareholder value, and could encourage companies to seek access to the public markets and remain public, which overall would provide investors more investment opportunities with the greater transparency afforded by Exchange Act reporting.

We acknowledge that investors in non-EGC NAFs, for at least the initial five years after the registrant's IPO, would not have disclosure about pay ratio and pay versus performance and would not be accorded the right to participate in certain advisory votes on executive compensation. However, we believe that extending these accommodations to non-EGC NAFs is an appropriate means of providing a meaningful on-ramp before the full burden of compliance with such requirements is borne by the registrant, which may further encourage those companies to go public sooner, which would be to the benefit of investors. As discussed above, we have not heard concerns from investors or other market participants over the SRC- and EGC-levels of disclosure, and accordingly we believe the disclosure provided to investors under the proposed amendments would allow investors in NAFs to make informed investment and voting decisions.

We acknowledge, as we have in the past,^[233] that the smallest issuers tend to be disproportionately represented among issuers with restatements and allegations of fraud. Such issuers generally already receive SRC accommodations and are exempt from the ICFR auditor attestation requirement, so the only change made by this proposal for such issuers is to make permanent for them most of the EGC accommodations. On balance, investors in smaller companies are better protected if those companies are subject to the requirements of the Exchange Act with scaled disclosure rather than in the private markets where there is often less disclosure. Because reporting companies provide audited financial information and other disclosure that is publicly available to investors and other market participants to review, fraud should also be easier to detect in reporting companies than in private companies. Therefore, we believe that investors would be better protected overall under the proposal because streamlining the complex filer status framework and providing disclosure and other accommodations may encourage more companies to go and stay public. In addition, the proposed changes could further benefit investors by providing them with a broader array of investment options in the public markets.

4. Application to Other Filer Types

We are proposing to exclude asset-backed issuers (as defined in Item 1101(b) of Regulation AB ^[234] ) and certain FPIs from the determination and application of LAF and NAF filer status.

Asset-backed issuers have a separate disclosure regime under Regulation AB and do not use Regulation S-K for their disclosure requirements, except in limited circumstances as directed by Regulation AB. As a result, the scaling and disclosure accommodations available to SRCs and EGCs are largely inapplicable to asset-backed issuers. We are therefore proposing to exclude asset-backed issuers from the proposed changes relating to LAF and NAF filer status. The Commission used a similar rationale to exclude asset-backed issuers from the prior “small business issuer” disclosure system ^[235] and the current definition of “smaller reporting company” under Exchange Act Rule 12b-2.^[236] Likewise, since asset-backed issuers are subject to an entirely separate disclosure and reporting regime under Regulation AB that is designed to address their particular structure and operations, asset-backed issuers do not qualify as EGCs (and the disclosure requirements and accommodations benefitting EGCs are not applicable to asset-backed issuers). We propose, however, to revise Form 10-K (17 CFR 249.310) to add a check box requiring a registrant to indicate whether it is an asset-backed issuer and to continue to require the 90-day reporting timeline for annual reports on Form 10-K for asset-backed issuers.

Additionally, we are proposing to exclude certain FPIs from the determination and application of LAF and NAF filer status. FPIs are permitted to use specialized forms and rules designated for FPIs.^[237] Because of the accommodations already provided on these forms, FPIs filing on Form 20-F and Form 40-F are currently not generally eligible for the scaled disclosure requirements available to SRCs.^[238] We are proposing to continue this treatment for FPIs by providing that the LAF and NAF definitions would not apply to FPIs that elect to comply with ( printed page 30111) the rules and use the forms designated for foreign private issuers.²³⁹ We are additionally proposing to revise Form 20-F to continue to require a registered public accounting firm's attestation report on ICFR for filers that had an aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $75 million or more as of the last business day of the issuer's most recently completed second fiscal quarter unless they qualify as an emerging growth company (as defined in 17 CFR 240.12b-2).²⁴⁰

We are not proposing to revise the way an FPI filing on Form 20-F performs the public float determination for purposes of this assessment to align with how we are proposing amendments to the way a registrant determines its public float for purposes of the LAF definition ( i.e., based on average of the stock price over the last 10 trading days of the second quarter). As a result, there will be differences between the two public float determinations. However, we believe retaining the current approach is preferable as it is consistent with the way FPIs filing on Form 20-F perform the public float assessment under existing rules, and as proposed, these FPIs that elect to comply with the rules and use the forms designated for foreign private issuers would not be otherwise eligible to use the requirements for NAFs.

We are also proposing retaining this treatment for FPIs in light of the Commission's 2025 concept release soliciting public comment on the definition of FPI, which seeks input on whether the definition appropriately balances the protection of investors with the promotion of capital formation.^[241] Given our ongoing evaluation in this area, we believe it is prudent to limit the effects of the proposed amendments on FPIs at this time, prior to completion of our more comprehensive review of the FPI framework.

5. Summary of Requirements for LAFs and NAFs Under the Proposal

Table 3 below summarizes the availability of scaling and accommodations to NAFs under Regulations S-K, as it is proposed to be amended:

( printed page 30112)

( printed page 30113)

( printed page 30114)

Tables 4 and 5 below summarize the availability of accommodations to NAFs within Regulation S-X, as it it proposed to be amended:

( printed page 30115)

( printed page 30116)

( printed page 30117)

Table 6 below summarizes the availability of scaling and accommodations to NAFs under other rules, as proposed to be amended:

Request for Comment

(12) Should we adopt as proposed the definition of “non-accelerated filer” that creates a single demarcation between LAF and NAF status based on public float?

(13) Should we extend, as proposed, the SRC and/or EGC accommodations to NAFs? Would the proposed reporting requirements for NAFs, including ( printed page 30118) proposed accommodations and disclosure scaling, promote investor protection and permit investors in these filers to make informed investment and voting decisions? As proposed, should BDCs and face-amount certificate companies that are NAFs continue to be required to provide performance graph disclosures to maintain parity with other RICs, and is this parity beneficial for investors? In other cases, are there certain accommodations or disclosure scaling that we should not apply to all NAFs and if so, which ones and why? For example, should we require banks and other financial institutions that will qualify as NAFs to comply with the requirements of Item 305 of Regulation S-K (Quantitative and qualitative disclosures about market risk) given the nature of their operations? Alternatively, are there other or new disclosure scaling or other regulatory accommodations that should be made available to NAFs?

(14) Because the proposed amendments would extend to NAFs the disclosure accommodations currently available to EGCs, the proposed amendments would generally make separate reliance on those JOBS Act provisions for EGCs unnecessary. In proposing this expansive treatment of NAFs that will generally provide EGC accommodations to NAFs, we are generally proposing to revise our rules to refer to NAFs and to remove references to EGCs and to add a new provision in Regulation S-K that details EGC statutory accommodations. Since EGC status was statutorily created and provides reference to certain rules through statute, should we remove all references in our rules and add a new provision in Item 10 of Regulation S-K as proposed, or retain references to EGCs in addition to references to NAFs in the rules?

(15) Should we codify in our rules the current process for non-public staff review of draft registration statements submitted by non-EGC issuers? If the current process is codified, what should be the approach included in the new rule? Would codifying the current review process unnecessarily “lock in” the current practice or would doing so provide regulatory certainty and clarity on the availability of non-public staff review?

(16) We have proposed excluding asset-backed issuers from the LAF and NAF filer status definitions. Should these issuers be included in the filer status definitions? Should any other issuers be excluded from the filer status definitions? Why or why not?

(17) Should we require disclosure in annual reports on Form 10-K or Form 20-F of material unresolved staff comments, as proposed? Why or why not?

(18) Given our ongoing evaluation relating to FPIs, we are proposing to limit the effects of the proposed amendments on FPIs prior to completion of our more comprehensive review of the FPI framework. Specifically, we are proposing to limit the application of the proposed changes as to FPIs by providing that the LAF and NAF definitions do not apply to a foreign private issuer that elects to comply with the rules and use the forms designated for foreign private issuers and revising Form 20-F to continue to use the $75 million public float threshold for the ICFR auditor attestation requirement. As a result, FPIs would continue to be required to include a registered public accounting firm's attestation on ICFR in annual reports on Form 20-F and Form 40-F as they do today, beginning at the current AF public float threshold of $75 million (unless they otherwise qualify as an EGC). Given the ongoing evaluation of the FPI rules by the Commission, is the proposed treatment appropriate? If not, how should we apply the proposed filer status amendments to FPIs? Should we consider revisions to Form 20-F and Form 40-F to apply the higher proposed LAF threshold to the ICFR auditor attestation requirement for these issuers? What other changes should we consider? How would this impact FPIs and their investors in the United States, including any costs and benefits?

(19) We have not proposed any accommodations specific to special purpose acquisition companies (“SPACs”) or other business combinations. As proposed, a SPAC would determine its filer status as an operating company would. As a result, the 60-month seasoning period would begin when the SPAC makes its initial public offering. Should we consider an accommodation for SPACs that would permit a new seasoning period to begin when a business combination between a SPAC and a private operating company occurs? Why or why not? Should a SPAC's 60-month seasoning period begin at some other time? Should the period start at different times for companies that incur Exchange Act reporting obligations in other ways, such as spin-offs? Are there other accommodations we should consider for SPACs or other business combinations?

(20) Would the proposal not to subject NAFs to the ICFR auditor attestation requirement result in cost savings for NAFs, even though management would continue to be required to provide their own assessment of the effectiveness of ICFR and the registered public accounting firm would continue to be required to consider and, in some instances, test internal controls in its audit of the NAF's financial statements? Would there be other impacts to the nature, timing, or extent of the auditor's testing and procedures that might offset any potential cost savings from not requiring ICFR auditor attestation? Please quantify, even if such estimates are provided as ranges or with caveats.

(21) Are there market or other reasons why registrants, in particular those that are currently AF or LAF but would become NAF under the proposed rules, would continue to or begin to obtain and disclose the results of an ICFR auditor attestation, even if not required? Should we require disclosure of the results of such voluntarily obtained attestation? What would the costs and benefits be of requiring such disclosure of a voluntarily-obtained attestation?

(22) Would the proposal not to subject NAFs to the ICFR auditor attestation requirement affect the reliability of financial statements? Would it affect the ability of investors to make informed investment and voting decisions based on the financial reporting of those issuers? Would investors factor the lack of attestation in their investment and voting decisions, pricing of securities, and/or in their consideration of a registrant's financial reporting? Would it result in any adverse consequences to NAFs in the capital markets or otherwise (such as the increased risk of restatement) due to not obtaining an auditor attestation of ICFR?

(23) Under the proposed rules, an NAF (other than an NAF that is an investment company) would be able to elect between compliance with Article 8 of Regulation S-X or all the other form and other content requirements in Regulation S-X. Should we retain this flexibility, or should all NAFs (other than those that are investment companies) be required to comply with either Article 8 or all the other form and content requirements in Regulation S-X?

(24) Under the proposed rules, an NAF that is a BDC or face-amount certificate company could not rely on Article 8 but would receive some of the same accommodations under proposed Rule 3-19. As proposed, should NAFs that are BDCs or face-amount certificate companies be unable to rely on Article 8? Are there other Article 8 accommodations that should be available to BDCs or face-amount certificate companies that are NAFs? If so, which ones, and why? Are there any changes to Article 8 accommodations that we should make for BDCs and face- ( printed page 30119) amount certificate companies to better recognize their activities and characteristics? For any different recommended approaches, please also explain if such approaches would create any disparities with similarly-situated RICs.

(25) We are proposing to revise Article 8 of Regulation S-X as it pertains to disclosure of summarized information of subsidiaries not consolidated and 50 percent or less owned persons to require annual summarized financial information and to require significance tests be performed consistent with Rule 1-02(w), substituting 20 percent for 10 percent. How would these proposed revisions to Article 8 affect financial statement disclosures? Do these proposed changes help to improve how Article 8 applies to disclosures of subsidiaries not consolidated and 50 percent or less owned persons? If not, why not?

(26) We are proposing to remove specific limited partnership disclosure requirements in Regulation S-X Rule 8-07. Should we retain Rule 8-07 relating to limited partnership disclosure for NAFs? If so, what information is the most useful to investors from that requirement? If that information is useful to investors in NAFs, should we consider applying the requirements more broadly to all issuers? Is there a reason that we should apply these requirements to NAFs, but not to LAFs?

(27) Under the proposed rules, NAFs would not be required to comply with Articles 5, 7, or 9 of Regulation S-X containing financial statement presentation requirements and related disclosures for commercial and industrial companies, insurance companies and bank holding companies, respectively. Would NAFs look to the form and presentation requirements in the applicable Article of S-X appropriate for their business anyway for purposes of preparing their consolidated balance sheets and statements of comprehensive income? If not, would investors and other market participants be able to evaluate the financial statements of NAFs given that NAFs may choose to use different formats for their consolidated balance sheets and statements of comprehensive income? Additionally, if the NAF didn't originally look to and comply with the presentation and related disclosure requirements in the applicable Article of S-X before it was required to upon becoming a LAF, would it create confusion for investors when the requirement to apply the applicable guidance results in a change in presentation and disclosures (for example to income statement line items) and/or would investors potentially lose information they were previously relying on? Should we require that NAFs comply with Articles 5, 7, or 9? Why? If so, what information is the most useful to investors from those requirements?

(28) Are there other changes that we should consider to Article 8 of Regulation S-X?

(29) As discussed above, we propose that newly public NAFs be able, in their first five years as public companies, to elect to defer compliance with new or revised financial accounting standards issued by the FASB that apply to all entities until such time as a company that is not an issuer is required to comply with such standards. This proposal would not affect the scenario where a new financial accounting standard issued by the FASB applies only to issuers ( i.e., it is not required to be adopted by private companies). In that case, newly public NAFs would be required to follow the adoption timeline in the FASB accounting standard, just as EGCs are required to do currently. Should we extend this deferral beyond five years for all newly public NAFs? Is the transition mechanism in the proposed rule amendments clear on how and when an NAF would be required to comply with all financial accounting standards applicable to issuers after the end of the five-year period? Should we additionally allow newly public NAFs, in their first five years as public companies, a one-year deferral option for adoption of new financial accounting standards issued by the FASB that apply only to issuers? Alternatively, should we permit all NAFs to defer compliance until such time as a company that is not an issuer is required to comply with such standards?

(30) The rules for listing standards relating to compensation committees (17 CFR 240.10C-1) provide a general exemption from those rules for SRCs and an admonition to consider the impacts of the rules on SRCs. As proposed, this general exemption would apply to NAFs. Should we consider any modification to this exemption in connection with the proposed amendments?

C. Small Non-Accelerated Filers

We are proposing to create a subcategory of the smallest NAFs, termed small non-accelerated filers or SNFs, and extend the deadlines for them to file their periodic reports.^[242] To qualify as an SNF under the proposed rules, a registrant would have to:

• Be an NAF; and
• Reporttotal assets of $35 million or less in its financial statements as of the end of each of its two most recent second fiscal quarters.

SNFs would be granted an additional 30 days to file their Form 10-K, extending their filing deadline from the 90 days applicable to NAFs to 120 days after fiscal year end. For the Form 10-Q, SNFs would be granted an additional five days, extending their filing deadline from the 45 days applicable to NAFs to 50 days after fiscal quarter end.^[243]

A registrant would determine its filer status annually, as of the last day of its fiscal year. If a registrant reports total assets of $35 million or less as of the end of each of its two most recent second fiscal quarters ( e.g., June 30 for a calendar year end registrant), the extended SNF deadlines would apply beginning with the annual report on Form 10-K for the year for which filer status was determined. As proposed, a new registrant reporting total assets at or below the threshold would be an SNF upon registration if, in its initial registration statement, it reported total assets of $35 million or less in its financial statements in each of its two most recent fiscal year balance sheets. The total assets testing date would be different in its initial registration statement because that registration statement would not be required to have two balance sheets as of the end of its two most recent second fiscal quarters, and may potentially not have any interim balance sheet depending on the filing date of the registration statement.

Once a registrant becomes an SNF, it would remain in SNF status until it becomes an LAF or reports more than $35 million in total assets as of the end of each of its two most recent second ( printed page 30120) fiscal quarters.^[244] Consistent with the approach to thresholds that we are proposing for LAF and NAF status, requiring the threshold be met in two consecutive years would address concerns about registrants frequently moving in and out of a given status, would be relatively easy for registrants to implement, and would provide registrants and investors with early notice of a possible change in filer status.

We are proposing to permit SNFs additional time to file their periodic reports in order to reduce compliance burdens for the smallest registrants, to thereby encourage them to continue as public companies providing audited financial information and other disclosures to their investors, and potentially to incentivize other companies to enter the public markets. In formulating this proposal, we are responding to concerns regarding the burdens that periodic reporting puts on the smallest public companies. At the Commission's 2025 Small Business Forum, one panelist noted that reporting requirements are “almost like an endless loop for small companies,” and that this burden is shouldered by “limited accounting financial personnel.” ^[245]

We have sought to target the proposed accommodation to the registrants for which additional time would be most beneficial. In order to do so, we considered the number of companies that filed a Form 12b-25 Notice of Late Filing.^[246] We believe that these registrants are generally working to comply with the requirements, based on their compliance with the requirements of 17 CFR 240.12b-25 notification of an inability to timely file, and generally do ultimately file their annual reports. Based on a review of Form 12b-25 filings in 2024, Commission staff found that 39.7 percent of registrants at or below the $35 million total asset threshold failed to file their Form 10-K annual report by the initial reporting deadline. In contrast, only 11 percent of larger NAFs (those with total assets above $35 million) failed to file their Form 10-K by the initial reporting deadline. Similarly, these smaller filers disproportionately filed their Forms 10-K over 15 days late, with 18 percent filing over 15 days late, compared with only 4.3 percent of larger NAFs. These data indicate that many smaller NAFs have difficulty filing their reports in time to meet the current deadlines.^[247] This may be because the smallest registrants are able to afford fewer staff dedicated to preparing public disclosure.^[248] In addition, Commission staff understand from ongoing engagement with market participants that it is harder for these registrants to engage PCAOB registered accounting firms and to receive focused attention from such firms during the busy filing season when larger registrants have retained the firms' audit services.

We believe a $35 million total asset threshold would target this accommodation on the population of registrants that would find the accommodation most useful. We estimate that setting the SNF asset threshold at $35 million or less would result in 1,072 registrants qualifying for the SNF subcategory, representing 22.2 percent of NAFs and 17.9 percent of all registrants ( i.e., all NAFs and LAFs combined, under the proposed definitions).^[249] As discussed above, the core rationale of our proposal to provide disclosure scaling and accommodations to NAFs is to reduce the burdens of registration for smaller registrants and thereby encourage those registrants to go and stay public. Similarly, the proposed extra time to file periodic reports for SNFs would provide an additional targeted accommodation easing the burdens of registered status for the companies for which those burdens may be heaviest.

We alternatively considered proposing a public float threshold or revenue threshold for determining SNF status. The table below shows, alongside the total asset figures discussed above, the public float and revenue thresholds that would capture similar proportions of NAFs, and, for each threshold, the percentage of filers in the new subcategory that filed a late Form 10-K in 2024.

( printed page 30121)

As shown above, there is a statistically significant difference in the proportions of NAFs that would qualify as SNFs under the proposed total assets threshold and the alternative public float threshold. The proposed total assets threshold also results in more NAFs qualifying as SNFs than would be the case under the alternative revenue threshold. Further, the proposed total assets threshold better encompasses the registrants that have recently faced difficulty in meeting the current reporting deadlines.

In addition, the consistency across registrants and industries in how assets are determined and presented in the financial statements may provide advantages over revenue, which may be less consistent for registrants in certain industries, such as BDCs, face-amount certificate companies, banks, and certain other financial institutions which do not typically have a traditional “total revenue” amount on their consolidated statement of operations,^[250] and public float, which can be inconsistent among registrants with smaller public float. Accordingly, we are proposing the SNF threshold be based on total assets.

We considered public float as an alternative to total assets for the SNF threshold test, and solicit comment on that alternative below. Using a public float threshold would make the entire filer status framework simpler and easier to understand as there would be one public float threshold for the largest filer tier (LAFs), and another public float threshold for the smallest filer tier (SNFs). Registrants and investors would also not have to track two separate metrics. Also, as noted in section II.A.1. above, the Commission has historically looked to public float in determining filer status and appropriate disclosure requirements and accommodations. However, we also recognize that public float may not be as meaningful a measure for the smallest of issuers because the share price for these issuers tends to fluctuate more significantly ( printed page 30122) than for other exchange-traded securities, which may affect the suitability of such number as a threshold for whether a registrant should be eligible for SNF accommodations.

We also considered revenue as an alternative for the SNF threshold test. We acknowledge that the Commission selected a revenue test for SRC status and, as the Commission did in 2018, that there may be filers who have relatively substantial public floats but lack the revenue flows needed to easily shoulder the expenses of periodic reporting.^[251] On the other hand, revenue alone may not be a reliable indicator of a company's ability to absorb the costs of periodic reporting. For example, some low margin companies may have high revenues, but those revenues may be offset by high expenses, leaving such companies less able to absorb reporting costs as compared to certain low revenue companies with relatively low expenses. Also, as stated above, there can be industry-specific considerations that impact the calculation of revenue.

We anticipate that, by providing the smallest registrants extra time that is not provided to other filers, there may be a reduction in the auditor and legal counsel fees the smallest filers incur in producing their periodic reports. Assuming similar fiscal year and quarter ends across registrants, service providers would presumably have less overlapping work for multiple registrants if the deadline to complete their work for larger filers is different than for the smallest filers. As one study on audit services found, given the difference in demand for busy season and off-season audits, audit service providers charge different prices to different clients for similar services, based on timing.^[252] The study further found that the capacity constraint during audit busy season “results in a relatively inelastic supply, raising the marginal cost of production and thus justifying higher audit fees.” ^[253] We believe that extending the deadlines for SNFs may ease some of the capacity constraints permitting SNFs to more readily engage audit and legal service providers at potentially lower costs.

We acknowledge that later reporting by SNFs could lead to some reduction in the utility that investors obtain from the reported information, as the information would be older upon disclosure, and would be delayed relative to larger registrants' periodic reports, thus delaying investors' ability to compare companies in making investment and voting decisions. The resulting negative effect on investors and the informational landscape may be made more acute by the fact that smaller registrants are less likely to receive analyst coverage.^[254] However, given the burden that periodic reporting imposes on the already-limited resources of smaller filers, we believe any reduction in reporting expenses resulting from the longer deadlines would have beneficial financial effects on the registrants, and that such financial effects may ultimately accrue to the benefit of investors. The additional time may also permit the registrant and its outside professional advisors to improve the disclosures, to the benefit of investors. In addition, registrants would still be permitted to voluntarily file their periodic reports earlier than the deadlines, and some may choose to do so, such as if they believe doing so would place them in a more favorable position in the informational landscape investors use to make investment and voting decisions or for other reasons.

To demonstrate how SNF status would work in practice assuming the proposed rules were in effect, consider a hypothetical registrant that is determining its annual filer status as of December 31, 2026 for a calendar year end registrant. The registrant has determined it does not qualify as an LAF, and so is an NAF. If the registrant's total assets, as of the end of the second quarter of the fiscal year ( i.e., June 30), in fiscal year 2025 were $30 million and in fiscal year 2026 were $33 million, the registrant would be an SNF for purposes of its fiscal year 2026 Form 10-K (filed in 2027).^[255] The earliest the registrant could cease qualifying for SNF status is on December 31, 2028, which would be reflected in its fiscal year 2028 Form 10-K (filed in 2029).

If the registrant remains an NAF and its total assets as of June 30, 2027 were $36 million, and its total assets as of June 30, 2028 were $37 million, it would cease to qualify for SNF status as of December 31, 2028, which would be reflected in its fiscal year 2028 Form 10-K (filed in 2029). In contrast, if its total assets as of June 30, 2027 were $36 million, but its total assets as of June 30, 2028 were $34 million, it would remain an SNF, and the earliest it could cease to qualify for SNF status due to its total assets is December 31, 2030.

Importantly, regardless of the registrant's total assets as of the end of the second quarters of fiscal years 2027 and 2028, if the registrant at any time becomes an LAF, it would lose NAF status, and thereby also no longer qualify as an SNF.

Request for Comment

(31) Would creating a subcategory within NAFs of the smallest registrants and reducing their compliance burdens by extending the deadline for them to file their periodic reports appropriately balance the goals of investor protection and capital formation? Would the creation of this subcategory help incentivize companies to go and stay public?

(32) We are proposing to provide extended periodic reporting deadlines to NAFs that meet a threshold of $35 million or less in total assets as of the end of their two most recent second fiscal quarters for existing registrants. Are NAF status and total assets as of the end of a registrant's two most recent second fiscal quarters the best measures for identifying the population that would most benefit from these accommodations? We are proposing that companies filing an initial registration statement perform the total assets test as of the end of the two annual periods presented in the initial registration statement. Is this the appropriate measure for identifying the population of SNFs, until such time as the company has the reporting history to perform the test based on total assets as of the end of its two most recent second fiscal quarters? If not, what measures should the Commission use to identify eligible registrants? Are there any risks of basing the test on total assets as of the end of a fiscal quarter for existing registrants given the total asset amounts will not be audited?

(33) We are proposing a $35 million asset threshold for determining SNF status. Should the asset threshold be set at a different number? If so, what number would be more appropriate and why? We are considering in the alternative using a public float or a revenue threshold for determining SNF status, as discussed above. Would either ( printed page 30123) of these other thresholds better identify a population that would benefit from the additional time proposed to be afforded to SNFs? If so, which measures would better identify these populations and at what threshold should such accommodations be provided? While we are not proposing any additional accommodations for SNFs at this time, recognizing that the Commission may add additional accommodations for SNFs in future rulemakings, would that weigh in favor of an asset or a public float test?

(34) As an alternative to an asset threshold test to determine SNF qualification, should we consider—other criteria? For example, should we consider providing the reporting deadline accommodations and potentially other accommodations to all registrants that are not listed on an exchange? Do investors in registrants that have chosen not to list their securities on an exchange, and the markets for those securities, have the same expectations or need for information on the same cadence as exchange-listed registrants? Should the Commission consider providing the reporting deadline accommodations or other accommodations to registrants that are not registered under section 12(b)? Registrants that are not registered under section 12(b) currently account for 1,256 of the 4,825 registrants that would be NAFs under the proposed rule. Alternatively, should the Commission consider providing these accommodations to registrants that do not have a class of common equity securities listed for trading on a national securities exchange? Such registrants currently account for 1,490 of the 4,825 registrants that would be NAFs under the proposed rule.

(35) Would the proposed extended periodic reporting deadlines have the intended effect of increasing the availability and reducing the costs to SNFs of accounting and legal service providers? If so, how?

(36) While this proposal would expand the number of registrants eligible to be NAFs and provide disclosure and other accommodation to all of these registrants, we are proposing a more limited additional accommodation relating to filing timelines to the proposed category of SNFs that have total assets of $35 million or less at this time. Should the Commission establish any disclosure or other accommodations specifically for SNFs, or are the accommodations provided to all NAFs (in addition to the filing accommodations for SNFs) at this time sufficient and appropriate? If there are other or alternative accommodations we should make available to SNFs, what accommodations should we consider and how would those accommodations appropriately balance capital formation and investor protection? For example, should we exempt SNFs from XBRL filing requirements in some, or all of their Exchange Act reports?

D. Proposed Transition Period

We propose that existing registrants as of the effective date of the rules would be required to assess their LAF or NAF status as of the end of their fiscal year prior to the effectiveness of the final rules. As discussed in section II.A.2, a registrant's status would be based on its public float and, if applicable, total assets, for such fiscal year and the immediately prior fiscal year. We propose that registrants be allowed to assess their status at any time after effectiveness of the final rules, but no later than the day prior to the last day of their fiscal year in which the final rules go into effect. If an existing registrant does not make this initial assessment by the deadline, then it would be deemed to be either (1) an LAF until the next assessment date, if it was an LAF prior the final rules' effectiveness or (2) an NAF until the next assessment date, in each other case. An existing registrant that does not make its initial assessment by the deadline and is therefore deemed to be an NAF would not be deemed to be an SNF even if its total assets would otherwise qualify it to be an SNF.

For example, if we adopt final rules that become effective on January 15, 2027, then existing calendar year end registrants would be required to assess their filer status as of December 31, 2026 no later than December 30, 2027, but would be permitted to complete such assessment as of any date between January 15 and December 30, 2027.

A registrant that qualifies as an NAF after its initial filer status assessment can avail itself of the scaling and other accommodations available to NAFs in its next Securities Act or Exchange Act filing made after the assessment is completed. A registrant that meets the proposed SNF requirements could avail itself of the filing deadlines available to SNFs in its next Form 10-Q or Form 10-K filing made after the initial filer status assessment is completed.

For purposes of their initial assessment after effectiveness of the final rules, existing registrants should not consider their filer status prior to effectiveness. For example, a registrant that is an LAF prior the amendments would treat itself as “not currently a large accelerated filer” in applying the definitions in Securities Act Rule 405 or Exchange Act Rule 12b-2. Accordingly, a registrant that is an LAF prior to the amendments would be an NAF after the effectiveness of the final rules if, as of the end of its fiscal year of the year prior to effectiveness, it (1) has not been subject to the reporting requirements of section 13(a) or 15(d) of the Exchange Act for the preceding sixty consecutive calendar months, or (2) did not have a public float of $2 billion or more for such fiscal year and the immediately prior fiscal year.

For example, assuming an August 1, 2027 effective date, if a calendar year end registrant had public float of $2 billion or more for 2026 and 2025 (determined at the end of each of its second fiscal quarters for 2026 and 2025, respectively), and if it had been a reporting company for at least 60 consecutive calendar months as of December 31, 2026, then it would continue as an LAF, and would continue to be required to comply with the reporting requirements for LAFs in its next Securities Act or Exchange Act filing after the initial filer status assessment was performed.^[256]

On the other hand, if the calendar year end registrant were an LAF prior to effectiveness of final rules on August 1, 2027 but would not meet either the proposed public float or the seasoning requirement for LAF status as of December 31, 2026 ( i.e., because its public float at the end of either of its two most recent second fiscal quarters was less than $2 billion and/or it had not met the 60-calendar month seasoning requirement), the reporting company could conduct its assessment as early as August 1, 2027, at which point it would become an NAF and could begin scaling its disclosure and availing itself of the other accommodations available to NAFs beginning with its next Securities Act or Exchange Act filing made after the initial filer status assessment was completed.^[257] If this registrant had total ( printed page 30124) assets of $35 million or less as of the end of each of its two most recent second fiscal quarters prior to December 31, 2026 ( i.e., June 30, 2026 and June 30, 2025), then it would be an SNF, and could begin availing itself of the longer reporting deadlines for SNFs with its next periodic filing ( i.e., the Form 10-Q for the fiscal quarter ended September 30, 2027).

Request for Comment

(37) Is the proposed transition mechanism of assessing filer status no later than the end of the issuer's fiscal year in the year prior to adoption of any final rules appropriate? If not, as of what date should filer status be assessed under the new rules? For example, would it limit complexity if all registrants were required to assess filer status as of the last day of the fiscal year in which the amendments are effective, instead of giving the option to assess sooner? As of what date should registrants be able to avail themselves of the scaling and other accommodations available to NAFs and SNFs?

E. Updating Small Entity Definitions

We are also proposing to update our rules that define which issuers are considered small entities for purposes of the RFA.^[258] The RFA requires an agency engaged in rulemaking to publish for public comment its analyses of the impact of proposed and final rules on small entities.^[259] While the RFA includes its own definitions of small entities, it also provides that an agency may, through rulemaking, and after consultation with the Office of Advocacy of the Small Business Administration (“SBA”), adopt a small entity definition that is “appropriate to the activities of the agency.” ^[260]

The Commission has adopted multiple such definitions, including at 17 CFR 230.157 (“Rule 157”) for purposes of the Securities Act, and 17 CFR 240.0-10 (“Rule 0-10”) for purposes of the Exchange Act.^[261] Rule 157(a) defines an issuer (other than an investment company) as a small entity if it has $5 million or less in total assets at fiscal year-end and engages in an offering of $5 million or less.^[262] Rule 0-10(a) provides that an issuer (other than an investment company) is a small entity if it has $5 million or less in total assets at fiscal year-end.

We have heard from small business advocates, including at the 2024 Small Business Forum, that the Commission should consider updating these thresholds.^[263] The Commission last updated the $5 million thresholds in Rules 157(a) and 0-10(a) in 1986.^[264] When the asset threshold was set to $5 million, it was based on the regulatory threshold for triggering section 12(g) registration.^[265] Today, the section 12(g) registration threshold is $10 million.^[266] Further, if the small entity thresholds in Rules 157(a) and 0-10(a) were adjusted to account for the inflation that has accrued since 1986, they would now be approximately $15.1 million.^[267]

We are proposing to revise Rule 157(a) and Rule 0-10(a) to raise the total asset threshold in the definition of a small entity issuer (other than an investment company) from $5 million to $35 million. The proposed amendments will also harmonize the Commission's small entity definitions for purposes of the Securities Act and the Exchange Act by eliminating the additional offering size condition that is a part of the existing small entity definition for purposes of the Securities Act (but is not for purposes of the Exchange Act). The proposed change would streamline and modernize the definition relative to the current definition, facilitate more meaningful analysis by the Commission and other regulators of the impacts of securities market regulations for purposes of the RFA, and align the thresholds with the proposed SNF threshold discussed above.

The Commission is required to determine if a rulemaking is likely to have a “significant economic impact on a substantial number of small entities” under the RFA.^[268] We believe that the proposed thresholds would better tailor the Commission's analyses of the specific regulatory challenges faced by small entities by expanding the scope of the analyses that the Commission conducts under the RFA and better inform the Commission of the regulatory impacts faced by smaller registrants. We believe that raising the threshold to $35 million, to match the proposed $35 million SNF threshold, would appropriately link the proposed category that provides accommodations to the smallest registrants with the new thresholds at which the Commission would be required to provide the RFA analysis of regulatory impacts. Based on calendar year 2024 data, under the proposed issuer small entity thresholds in Rules 157(a) and 0-10(a) 1,419 registrants (excluding issuers of asset-backed securities, investment companies, and BDCs) would be small entities.

Request for Comment

(38) Should we amend Rules 157(a) and 0-10(a) to update the thresholds, as proposed?

(39) If we update the thresholds, should we align them with the $35 million SNF threshold, as proposed? If not, what other threshold or thresholds should we use? For example, should we update the threshold to $10 million to link it to section 12(g) or alternatively to $15 million to adjust for inflation? Should we otherwise implement an ongoing inflation adjustment? If so, how?

F. Other Amendments

As part of our ongoing efforts to update and simplify reporting and disclosure requirements, we are proposing revisions to remove outdated requirements or phase-in periods that are no longer applicable, eliminate certain requirements that overlap with U.S. GAAP, and make additional technical amendments.^[269] In addition, when adopting reporting requirements, the Commission has at times provided for phase-ins or other transitions in its rules and adopted some rules to implement statutory mandates that are no longer applicable to current registrants. We are proposing to remove the following provisions that we believe are no longer necessary or generally applicable:

• 17 CFR 240.10A-3(a)(5)—The implementation provision for the rules ( printed page 30125) regarding listing standards relating to audit committees required compliance by July 31, 2005 at the latest and appears to be no longer necessary.^[270]

• 17 CFR 240.14a-20—This rule was adopted to implement section 111(e) of the Emergency Economic Stabilization Act of 2008 (“EESA”) (12 U.S.C. 5221(e)).^[271] The EESA established that companies that received financial assistance under the Troubled Asset Relief Program must provide a shareholder advisory vote to approve the compensation of executive officers during the period that any obligation arising from that assistance remains outstanding. We believe that registrants no longer have these obligations outstanding making the rule unnecessary.

• 17 CFR 232.405(f)—This rule provision provided phase-in periods for Inline XBRL submissions through September 17, 2021.^[272] Since the phase-in periods were completed in 2021, the rule provision is no longer necessary.

• 17 CFR 210.4-08(h)—This rule provision requires disclosure of the components of income (loss) before income tax expense (benefit) and income taxes as either domestic or foreign as well as disclosure of a reconciliation of reported income taxes to an amount computed by multiplying income before tax by the applicable federal tax rate. Because required income tax-related disclosures are addressed in ASU 2023-09, Improvements to Income Tax Disclosures, we propose removal of this requirement.

In addition, we propose to eliminate certain requirements the Commission identified in the 2016 Disclosure Update and Simplification proposing release as overlapping with, but requiring information incremental to, U.S. GAAP.^[273] In the subsequent adopting release, the Commission determined to defer eliminating the overlapping requirements, and instead referred them to FASB for incorporation into U.S. GAAP through its standard setting process.^[274] These requirements were adopted by the FASB in 2023.^[275] We believe the requirements can therefore now be eliminated from our rules. Specifically, we propose to eliminate the following:

• 17 CFR 210.3-15(c)—This rule provision requires a real estate investment trust to disclose the tax status of distributions per unit.17 CFR 210.4-08(b)—This rule provision requires disclosure of amounts of assets mortgaged, pledged, or otherwise subject to lien, and identification of obligations collateralized.
• 17 CFR 210.4-08(d)—This rule provision requires entities that issue preferred stock to disclose preferences on involuntary liquidation, if other than par or stated value. We propose also to eliminate the reference to this provision in 17 CFR 210.5-02.27(c).
• 17 CFR 210.4-08(m)—This rule provision requires disclosure of certain amounts associated with repurchase agreements and reverse repurchase agreements in specified circumstances.
• 17 CFR 210.4-08(n)—This rule provision requires disclosure of an entity's accounting policy for the cash flow presentation of certain derivative instruments.
• 17 CFR 210.5-02—This rule provision, at paragraphs 19 and 22, requires disclosure of the amounts and terms of unused lines of credit for short-term and long-term financing, including the weighted-average interest rate on short-term borrowings.
• 17 CFR 210.10-01(b)(2)—This rule provision requires, in interim financial statements, that the basis of the diluted earnings per share computation be stated together with the number of shares used in the computation.
• 17 CFR 210.10-01(b)(7)—This rule provision requires, in interim financial statements, disclosure of any material retroactive prior period adjustment related to changes in reporting entities and the effect of the adjustment on net income and retained earnings. We propose also to remove the last sentence of current 17 CFR 210.8-03(b)(5), as that sentence relates to the same requirement.
• 17 CFR 229.302(b)—This rule provision requires disclosure of supplemental oil and gas information.

Further, we propose two other technical amendments:

• 17 CFR 210.5-02.20—This rule provision requires disclosure of the current portion of deferred taxes. Because ASU 2015-17, Balance Sheet Classification of Deferred Taxes (November 2015), changed the classification of deferred taxes to noncurrent only, we propose to remove the reference to the current portion of deferred taxes.
• 17 CFR 229.914(c)(2)—This rule provision requires disclosure of the ratio of earnings to fixed charges. Similar required disclosure was eliminated by the Commission elsewhere in our rules in 2018,^[276] and should be removed here as well.

Request for Comment

(40) Should we eliminate the rule provisions, and make the other technical amendments, identified above? Why or why not? Should we consider eliminating any other rule provisions or making any other technical amendments?

III. Other Matters

This proposing release is an economically significant regulatory action under section 3(f)(1) of Executive Order 12866 and has been reviewed by the Office of Management and Budget. This action, if finalized as proposed, is expected to be an Executive Order 14192 deregulatory action.

IV. Economic Analysis

We are mindful of the economic effects that may result from the proposed rules, including the benefits, costs, and the effects on efficiency, competition and capital formation.^[277] This section analyzes the expected economic effects of the proposed amendments relative to the current baseline, which consists of the regulatory framework of disclosure requirements in existence today, the current disclosure practices of registrants, and the use of such ( printed page 30126) disclosures by investors and other market participants.

The Commission has long sought to optimize the application of public disclosure requirements so that those requirements are appropriately calibrated to reduce the costs of disclosure for different categories of issuers. Over time, the Commission and Congress have adopted various “filer statuses” to establish tiers of registrants and offer to certain tiers various accommodations, which bear on the timing and content of registrants' periodic reporting. The filer status framework that has developed is layered and complex, with multiple thresholds for the determination of a registrant's tier and levels of disclosure and other differentiated requirements. Additionally, since the adoption of the LAF filer status in 2005, the $700 million public float threshold for this status has not been amended. Since 2005, the share of registrants meeting this threshold has grown from 18 percent to 35 percent, and registrants classified as LAFs now represent 99 percent of total market public float, up from 95 percent in 2005, which subjects a broader set of registrants to the requirements originally intended for the largest market participants.^[278] Another 13 percent of all registrants are currently classified as AFs.^[279] Registrants classified as LAFs or AFs incur higher public reporting and disclosure costs due to tier-specific requirements, such as the ICFR auditor attestation requirement, which is disproportionately costly for smaller companies. Data show that the number of Exchange Act reporting companies filing on domestic forms fell from 6,996 in 2004 to 5,976 in 2024.^[280]

The proposed amendments would streamline the filer status categories and align disclosure and other reporting requirements and deadlines with registrants' market capitalization. The proposed amendments would raise the public float threshold for LAF status to $2 billion, which would capture the largest approximately 20 percent of registrants, which represent approximately 93.5 percent of total market public float.^[281] Under the proposed amendments, all issuers that do not qualify as LAFs would be classified as NAFs. These latter registrants, who collectively represent about 6.5 percent of total market public float, would be afforded the proposed scaled disclosure requirements and other accommodations, which are comparable to current SRC and EGC disclosure standards. The proposed amendments are expected to reduce required disclosure and reporting costs for the affected registrants, principally for those currently classified as LAFs or AFs that would qualify as NAFs under the proposal. Further, the proposed amendments would create a subcategory of the smallest NAFs, termed SNFs, and extend the deadlines for them to file their periodic reports. The objective of the proposed amendments includes streamlining the filer categories and reducing compliance burdens for registrants, which could encourage them to continue as public companies providing audited financial information and other disclosures to their investors and potentially incentivize other companies to enter the public markets.

We consider below the potential benefits and costs of the proposed rules and their likely effects on efficiency, competition, and capital formation. Many of the benefits and costs are difficult to quantify or estimate with any degree of certainty. These difficulties are exacerbated by the limited public data that would inform predictions about how market participants may respond to the proposed rules.^[282] Where we are unable to quantify the economic effects of the proposal, we provide a qualitative assessment of the potential effects and encourage commenters to provide data and information that would help quantify the benefits and costs of the proposed rules, and the potential impacts of the proposed rules on efficiency, competition, and capital formation.

A. Baseline and Affected Parties

The baseline against which the costs, benefits, and the effects on efficiency, competition, and capital formation of the proposed rule amendments are measured consists of the current state of the markets, the current regulatory framework with respect to registrant reporting obligations, and registrant characteristics.^[283]

1. Regulatory Baseline

Our baseline includes existing statutes and Commission rules that govern the responsibilities of registrants with respect to financial reporting, as well as PCAOB auditing standards.

a. Filer Statuses

Every registrant that has an Exchange Act reporting obligation must file reports, including annual and quarterly reports, with the Commission.^[284] As discussed in section I above, registrants with these reporting obligations are currently classified into one or more filer statuses, including AFs, LAFs, SRCs, and EGCs.^[285] Registrants' disclosure requirements, including requirements as to the timing and content of periodic reports, vary according to their filer status, as discussed in more detail below.

b. Reporting Requirements; Scaled Disclosures and Other Accommodations

LAFs, AFs, and NAFs must file periodic (quarterly and annual) reports.^[286] AFs and LAFs are subject to accelerated filing deadlines for their periodic reports, relative to NAFs. These current deadlines are summarized in EA Table 1 below. All registrants are permitted to file Form 112b-25 (Notification of Late Filing) (“Form NT”) to avail themselves of an additional 15 calendar days to file an annual report, or an additional five calendar days to file a quarterly report, and still have their report deemed to have been timely filed.^[287]

( printed page 30127)

SRCs and EGCs currently may avail themselves of certain scaled disclosure and other accommodations.^[288] SRCs are permitted to, among other things: (i) prepare financial statements in accordance either with Regulation S-X provisions for larger filers or Article 8 of Regulation S-X (scaled financial disclosure); (ii) provide two (instead of three) years of audited financial statements in their registration statements and annual reports; (iii) not provide the supplementary financial information required by Item 302 of Regulation S-K; and (iv) provide scaled executive compensation and other Regulation S-K disclosures.^[289] EGCs are, among other things: (i) permitted to provide two years of audited financial statements in their initial equity public offering registration statement; (ii) permitted to provide scaled executive compensation disclosures and other Regulation S-K disclosures on the same basis as SRCs; and (iii) exempt from the ICFR auditor attestation requirement.^[290] To the extent a registrant qualifies for both statuses, it may avail itself of both the EGC and SRC scaled disclosure accommodations.

Section 404(a) of the Sarbanes-Oxley Act mandates Commission rules requiring all registrants subject to Exchange Act reporting requirements to include in their annual reports an internal control report that states the responsibility of management for establishing and maintaining ICFR and that contains an assessment of the effectiveness of the registrant's ICFR as of the end of each fiscal year.^[291] Section 404(b) of the Sarbanes-Oxley Act requires that each registered public accounting firm that prepares or issues a registrant's financial statement audit report (other than that of a registrant that is an EGC) attest to, and report on, management's assessment of the effectiveness of ICFR.^[292] Registrants that are not LAFs or AFs are exempted from the ICFR auditor attestation requirement under section 404(c) of the Sarbanes-Oxley Act.^[293]

Audits of ICFR, and the associated ICFR auditor attestation reports, are made in accordance with AS 2201.^[294] While the ICFR auditor attestation requirement is intended to enhance the reliability of management's assessment and conclusion regarding the effectiveness of ICFR, the ICFR auditor attestation requirement is associated with certain costs that may be significant, particularly to smaller registrants.^[295]

c. Proposed Rules

Recently, the Commission proposed to amend the rules related to periodic reporting under the Exchange Act to allow certain reporting companies to meet their interim reporting obligations either by filing quarterly reports or semiannual reports at the election of the company.^[296] If adopted as proposed, a reporting company that elects semiannual reporting would file one semiannual report and one annual report for each fiscal year, filing its interim report on a new semiannual form within 40 or 45 days (depending on filer status) after the fiscal year's first semiannual period end.^[297] Registrants that elect to report quarterly would continue to file quarterly and annual reports, as under the current regime for reporting companies.^[298]

2. Affected Parties

The parties that are likely to be affected by the proposed amendments include registrants subject to reporting obligations under section 13(a) or 15(d) of the Exchange Act,^[299] which include both domestic registrants and FPIs that file on domestic forms, as well as investors and other market participants that use information in these registrants' filings ( e.g., financial analysts, investment advisers, lenders, and asset managers). We also note that, because registrants' equity securities are owned by investors, any effects on registrants as a result of the proposed amendments will ultimately accrue to investors. The proposed amendments could also have secondary effects on other parties, such ( printed page 30128) as FPIs that file on FPI forms ^[300] and audit firms.^[301]

We estimate that 5,976 registrants filed on domestic forms during calendar year 2024.^[302] Each of these registrants falls into one of the filing status categories listed in EA Table 2 below under current rules.^[303] The registrants in the listed categories in EA Table 2 would be affected differently by the proposed amendments, and we discuss these effects in detail below in section IV.B. Around half of the registrants that currently have LAF filer status would not be affected by the proposal and would remain LAFs under the proposed amendments. The proposed amendments would affect, to varying degrees, the disclosure requirements and other accommodations and in some cases reporting timelines for all other registrants.

3. Registrant Characteristics

a. Public Float

Per EA Table 2, there were approximately 2,115 LAFs in total in 2024. Figure 1 presents the distribution of public float across these LAFs, as well as for the subset of these LAFs that would be “seasoned” LAFs under the proposed rules, those that have been subject to financial reporting under section 13(a) or 15(d) of the Exchange Act for a period of 60 consecutive months or longer.^[304] Because LAFs' reported public float values span an extensive range, with some reporting public float values in the trillions of dollars, we limit the range of public float values for purposes of displaying them in this figure at $25 billion. We gather public float data from the front page of registrants' Form 10-K filings, which is reported as of the last day of their second fiscal quarter under the current rules.^[305] The overall distribution of LAFs' reported public float values is skewed, with a median of approximately $3.4 billion and a mean of $21.2 billion. “Seasoned” LAFs tend to report larger public float values, with a median of approximately $4.0 billion and a mean of $23.7 billion.

( printed page 30129)

We also find that registrants' reported public float values are fairly persistent over time. Figure 2 plots each individual LAF's reported public float from its Form 10-K filings in calendar year 2024 ( y -axis) against its reported public float from its Form 10-K filings in the immediately preceding fiscal year ( x -axis).^[306] As demonstrated by the proximity of the observations to the 45-degree line in the figure, registrants' reported public float values in calendar year 2024 are significantly positively correlated with reported public float values from the prior year.^[307] To the extent that reported public float values for an individual LAF vary across years, we observe that more observations lie above the 45-degree line, signifying that LAFs' reported public float values were more likely to grow over the sample period than shrink (broadly consistent with the aggregate market trends during that period). For example, we estimate that public float grew from the prior year for 1,264 observations (70 percent of all observations in Figure 2) and grew 20 percent or more for 801 observations (44 percent of all observations in this figure).

( printed page 30130)

b. Assets

EA Table 3 presents summary statistics on the distribution of assets across registrants with Form 10-K filings in calendar year 2024.^[308] Registrants' assets are significantly varied and skewed by registrants with very high reported total assets, with median reported total assets of approximately $597 million but mean total assets of approximately $12.7 billion. Some registrants (less than one percent) reported zero total assets in their last fiscal year, while more than 22 percent of registrants reported total assets of greater than $5 billion. We interpret the estimates in the lower panel of EA Table 3 as lower bounds for the percentages of registrants that have total assets below each threshold as we do not have total data for all registrants.^[309]

( printed page 30131)

We also find that registrants' reported total assets tend to persist over time, but this persistence varies noticeably by registrant size (as measured by their reported total assets). Smaller registrants' assets from the fiscal year preceding the year referenced in calendar year 2024 filings are only slightly correlated to their assets from the year that is two fiscal years prior, while the correlation is much higher for those registrants reporting higher values of total assets.^[310]

c. Timing of Filings

As discussed above, currently NAFs, AFs, and LAFs are subject to different filing deadlines for their periodic reports. In EA Table 4, we present the timing in calendar year 2024 of filings of annual reports on Form 10-K and quarterly reports on Form 10-Q by current NAFs, AFs, and LAFs relative to their corresponding deadlines.^[311] EA Table 4 shows that AFs and LAFs file their annual reports, on average, six or seven days before the applicable deadline. Seven percent and two percent, respectively, of AFs and LAFs submit their annual reports after the initial deadline, with approximately one quarter of these late-filing registrants equaling or surpassing the 15-day grace period for an annual report on Form 10-K that is obtained by filing Form NT. NAFs are significantly less likely to meet their initial deadline or extended deadline, with 26 percent of NAFs filing after their initial deadline and 11 percent of NAFs filing after the 15-day grace period for an annual report on Form 10-K obtained by filing Form NT (over 40 percent of late-filing NAFs). The timing of quarterly report filings displays patterns across filer status that are similar to those described for annual report filings above.

( printed page 30132)

d. Internal Controls and Restatements

We next consider the current rates of ineffective ICFR and restatements across registrants of varying filing statuses, as classified under current rules. As discussed in section IV.A.1.b, NAFs and EGCs are statutorily exempted from the ICFR auditor attestation requirement. EA Table 5 presents the percentage of registrants reporting ineffective ICFR in recent years by filer type.^[312] Based on management's assessment of ICFR under section 404(a) of the Sarbanes-Oxley Act from recent years, LAFs were least likely to report at least one material weakness in ICFR in a given fiscal year (approximately five percent, on average), followed by AFs (approximately 16 percent, on average) and NAFs (approximately 42 percent, on average). It is important to note that a material weakness that is identified and remediated within the same period may not be reported in management's year-end assessment of ICFR under section 404(a) of the Sarbanes-Oxley Act.^[313] The ineffective ICFR percentages for LAFs and AFs in Table 5, compiled from filings, therefore may underestimate the likelihoods of having had at least one material weakness prior to or absent ICFR auditor attestation. For registrants subject to the ICFR auditor attestation requirement, the rates of ineffective ICFR reported by management and by auditors are nearly identical.^[314] This may not be surprising, as management and the audit committee will be made aware of any material weaknesses discovered by the auditor and vice versa.^[315]

We next consider the persistence of material weaknesses in ICFR across these registrant categories as classified under current rules. EA Table 6 presents the percentage of registrants that reported two, three, or four consecutive years of ineffective ICFR culminating in 2024, by filer type.^[316] Compared to NAFs, we find that a smaller percentage of AFs and LAFs report material weaknesses that persist for multiple years, with about four percent of AFs and about 0.4 percent of LAFs reporting ineffective ICFR for four consecutive years, representing about 30 percent of the AFs and about 11 percent of the LAFs that reported ineffective ICFR in 2024. A larger percentage of NAFs persistently report material weaknesses, with about 25 percent of these registrants, or more than two-thirds of those reporting ineffective ICFR in 2024, having reported material weaknesses for four consecutive years.

( printed page 30133)

EA Table 7 presents the percentage of registrants that made at least one “Big R” ^[317] restatement (among NAFs, AFs, and LAFs, excluding EGCs, and for EGCs separately) in each case as classified under the current rules.^[318] For each year, we consider the percentage of registrants that eventually restated the financial statements for a Big R restatement for that fiscal year. The reporting lag before restatements are filed results in a lower observed rate in the later years of our sample, particularly for 2023 (and even more so for 2024, which we do not report for this reason), as registrants may not yet have restated their results from recent years. We find that EGCs, which are not subject to the ICFR auditor attestation requirement and generally are also younger registrants than those in the other filer categories, restate their financial statements for a Big R restatement at higher rates than other registrants.^[319] For NAFs, which also are not subject to the ICFR auditor attestation requirement, we find that the percentage of registrants reporting Big R restatements is only slightly higher than that for AFs, which are subject to the ICFR auditor attestation requirement. We note that there is a greater proportion of low- or zero-revenue issuers in the NAF category, and these types of issuers have been found to have lower rates of Big R restatements than other issuers.^[320]

( printed page 30134)

e. Regulatory Burden

Multiple commenters and studies speak to the burden of compliance costs.^[321] Some studies cite the regulatory burden of SEC reporting and the requirements imposed by the Sarbanes-Oxley Act as a deterrent to going public.^[322] Some academic research has found significant and meaningful increases in auditing costs and lower stock returns for small registrants required to obtain an ICFR auditor attestation, relative to similarly sized registrants exempt from this requirement.^[323] Some studies have argued that, to the extent that public company disclosure requirements can result in competitors obtaining key information about the company (a “proprietary cost” of disclosure), information-driven companies may increasingly decide not to seek funding through public markets.^[324]

Conversely, other studies conclude that regulatory burden is not a significant driver of the going public decision ^[325] and attribute the declining number of public companies to other causes. One explanation offered for this decline is that U.S. public companies have engaged in more acquisitions since the passage of the Sarbanes-Oxley Act, including of private companies.^[326] Consistent with this proposed explanation, the increase in the average size of a listed company paralleled the decline in the count of U.S. public companies.^[327] Some other studies have cited growth in the availability of private capital as displacing the role of an initial public offering.^[328] Other ( printed page 30135) studies point to changes in institutional investor preferences to favor late-stage private companies over initial public offerings.^[329]

B. Economic Benefits and Costs

In this section, we discuss the potential economic effects of the proposed amendments. As detailed in section II, the proposed amendments would simplify the current filer status definitions by: (i) eliminating the AF and SRC statuses and focusing the filer status framework on two filer categories—LAF and NAF (any filer that does not qualify as an LAF); (ii) raising the threshold for qualifying as an LAF ( i.e., requiring the registrant to have public float of at least $2 billion instead of the current $700 million and to have been a reporting company for 60, instead of the current 12, consecutive months); and (iii) providing an additional extension of periodic report filing deadlines for a new subcategory of NAFs called SNFs. As a consequence of the proposed amendments, an expanded subset of filers would be afforded various disclosure and other regulatory relief accommodations that currently are applicable to the more narrowly defined subset of filers qualifying as SRCs, EGC, and/or filers that are NAFs. While EGC status will remain as it is established by statute, functionally, the proposed amendments will extend virtually all ^[330] of the accommodations currently exclusive to EGCs to all NAFs.

The discussion below addresses the economic benefits and costs of the proposed amendments. Much of the discussion in this section is qualitative in nature because we lack data needed to estimate many of the benefits and costs of the proposed amendments.^[331] We encourage market participants to submit data that would help quantitatively assess the benefits and costs of the proposed amendments.

1. General Economic Effects of the Proposed Amendments

The proposed amendments, when considered in their entirety, would simplify the existing framework of filer status categories and scale the scope of affected registrants' disclosure obligations under the Exchange Act. The proposed amendments would raise the public float threshold for LAFs from $700 million to $2 billion.^[332] The proposed threshold would capture close to 20 percent of registrants based on public float, which represent approximately 93.5 percent of total market public float. The remaining approximately 80 percent of all registrants which would not qualify for a filer status of LAF would be classified as NAFs under the proposed amendments (about 28.8 percent of all registrants that are not NAFs today but would be newly classified as NAFs under the proposed amendments and about 51.9 percent of all registrants that are NAFs today and that would remain NAFs). All NAFs would be afforded the proposed scaled disclosure requirements and other accommodations. The smallest registrants with NAF filer status (based on total assets), SNFs, would also be granted extended deadlines to file their periodic reports. In accordance with the proposed $35 million asset threshold for SNFs, 22.2 percent of registrants that would be classified as NAFs (under the proposal) and 17.9 percent of all registrants ( i.e., all NAFs and LAFs under the proposed amendments) would qualify for the filer status of SNF.

The proposed amendments would be expected to reduce public disclosure and reporting compliance costs for affected registrants, principally for those that are currently classified as LAFs or AFs but would be NAFs under the proposal. Generally, lower compliance costs reduce a registrant's operating expenses and improve its net income and free cash flow. Increased internal cash flows may allow registrants to redeploy freed up resources toward productive investment and growth opportunities,^[333] thus improving capital allocation and enhancing expected future cash flows. Higher sustained profitability increases shareholder value, provided that the potential impact from regulatory accommodations on transparency or investor protections does not offset the lowered operating expenses. We estimate that the proposed amendments would reduce compliance costs in net terms for all affected registrants by approximately $1.9 billion on an annualized basis per year over 10 years.^[334]

Under the proposed amendments, the information that registrants newly classified as NAFs (about 28.8 percent of all registrants) would be required to provide in their public disclosures would be reduced (as discussed in section IV.B.3). Also, both newly eligible NAFs and existing NAFs that currently do not qualify as SRCs and/or EGCs would be afforded additional disclosure relief presently reserved for SRCs and/or EGCs (as discussed in section IV.B.5) and registrants newly classified as SNFs would have extended deadlines to file their periodic reports ( printed page 30136) (as discussed in section IV.B.6). Generally, investors' costs to access reliable information increase when that information is not included in public disclosures because investors incur search costs to gather and evaluate the information from other sources. Generally, a loss of information from public disclosure can increase investors' costs to access reliable information, or when information becomes inaccessible, information asymmetries between registrants (and their managers) and investors, as well as amongst investors, increase. This potentially makes it more difficult and costly for investors to make informed investment and voting decisions, resulting in potentially less informative share prices. However, the registrants that would be eligible for scaled disclosure and other accommodations represent only around six percent of total market public float.

2. Amendments to LAF Definition

We estimate that the proposed amendments would result in 1,721 additional registrants (28.8 percent of all registrants) being newly eligible to qualify as NAFs, for an estimated total of 4,825 NAFs (80.7 percent of all registrants) under the proposal.^[335] Of these 1,721 additional registrants, 964 registrants are currently reporting as LAFs and 757 registrants are currently reporting as AFs.^[336] In addition, of these 1,721 additional registrants, 16 are BDCs.^[337] We estimate that the proposed amendments would result in 1,146 registrants (19.2 percent of all registrants) continuing to be LAFs,^[338] and that these registrants would account for approximately 93.5 percent of the total market public float reported by all registrants.^[339] In comparison, the 2,115 registrants under the baseline in 2024 that meet the current definition for LAF status accounted for approximately 98.8 percent of the total market public float.

As part of these estimates, we account for the proposed extension of the seasoning period for LAFs from 12 months to 60 months.^[340] This would result in fewer registrants being LAFs—and thus, in more registrants qualifying for NAF status—under the proposed amendments than if the seasoning period were to remain at 12 months. The proposed amendments also would amend the timing and methodology of the calculation of public float for purposes of determining a filer's status.^[341] This may provide a more stable, public float calculation window for registrants nearing the LAF threshold, particularly, in periods of significant short-term stock volatility.

The estimates of the number of registrants that would be affected by the proposed amendments to the definition of LAF filer status may overstate the actual number of affected filers because of potential “bunching,” a term which refers to an unusually high number of companies just below a threshold that triggers additional disclosure requirements. Some studies have found the existence of such bunching in other contexts.^[342] For purposes of our analysis, any existing bunching is incorporated in the baseline estimates. However, if new bunching were similarly to emerge around the proposed $2 billion threshold, the estimates based on the existing data may underestimate the number of registrants that would newly qualify as NAFs, and thus, the aggregate economic effects of the proposed amendments.

The proposed amendment would also expand the subset of registrants eligible for NAF status, and thus eligible for scaled compliance requirements, which would reduce costs for those registrants ( printed page 30137) and would generally decrease the information available to investors, to the extent the investors do not obtain information through other means. The costs and benefits of these scaled compliance requirements are discussed in greater detail in the sections below.

3. Exemption From ICFR Auditor Attestation

We estimate the proposed amendments would result in 1,596 registrants (26.7 percent of all registrants) being newly exempt from the ICFR auditor attestation requirement under section 404(b) of the Sarbanes-Oxley Act, representing approximately 60 percent of all registrants that are currently subject to the ICFR auditor attestation requirement.^[343] Of these 1,596 registrants, 964 are currently reporting as LAFs and 632 are currently reporting as AFs.

The intention of the ICFR auditor attestation requirement is to attest to the accuracy of management's ICFR assessment which should lead to more complete identification and disclosure of material weaknesses in ICFR. As management is likely to want to avoid negative ICFR conclusions, attestation should lead to more effective ICFR and hence more reliable financial reporting. This requirement, however, has also been associated with significant compliance costs.

To evaluate the benefits and costs of ICFR auditor attestation, and hence the benefits and costs of providing an attestation exemption, we rely primarily on academic research studies. Much of this research was conducted shortly after the implementation and delayed compliance of section 404 of the Sarbanes-Oxley Act in the 2000s.^[344] These studies examined the impact of requiring section 404(b) compliance for registrants, which provides the most natural setting for understanding its potential exemption. There have been significant changes over time, however, in the implementation of the ICFR auditor attestation requirement, the standards applying to a financial statement audit even in the absence of an audit of ICFR, and the use of technology in the execution of audits of financial statements and of ICFR.^[345] In addition, auditors have had many years of experience with integrated audits, as well as risk assessment standards that require the consideration of ICFR even in the absence of ICFR auditor attestation.^[346] These factors may have the effect of reducing both the incremental costs and incremental benefits of an ICFR auditor attestation today relative to the periods studied in much of the existing research. We therefore acknowledge that these factors may limit our ability to rely on the findings of past research to predict how the proposed amendments would affect the issuers implicated by this rulemaking.

a. Potential Benefits of Eliminating the ICFR Auditor Attestation Requirement for Affected Registrants

The proposed amendments would relieve affected registrants' aggregate compliance costs related to ICFR auditor attestation by decreasing the number of registrants who are subject to the ICFR auditor attestation requirement. Estimating the magnitude of the reduction in annual audit fees is difficult because while registrants disclose total audit fees, they do not break out fees for section 404(b) compliance separately.^[347] In 2019, the Commission estimated total costs associated with ICFR auditor attestation to be $210,000 per issuer per year.^[348] In 2025, the GAO analyzed the change in audit fees for a sample of 98 registrants that transitioned from being exempt from section 404(b) to non-exempt.^[349] The GAO study found that companies that transitioned from exempt to non-exempt status experienced an increase in audit fees in the year of the transition and concluded that the increase in audit fees was likely partially attributable to section 404(b) compliance costs, with a median increase of around $219,000.^[350] A 2017 study estimated section 404(b) compliance led to an increase in audit fees of 8.8 percent which translated to about $100,000 per year.^[351] The study caveated that section 404(b) compliance requires more than direct auditor fees, and the use of outside vendors and internal labor could increase their estimate significantly.^[352] These two studies focused on registrants impacted by thresholds governing existing NAF, SRC, and EGC statuses. The affected parties under the proposed rule, however, namely newly eligible NAFs, are larger on average than those registrants, including some that are LAFs today. Evidence suggests that audit fees increase with registrant size, and thus we expect that section 404(b) compliance costs could be higher than those estimated above for the existing LAFs and AFs that would be newly eligible for NAF status under the proposed rule and thus no longer required to incur those costs.^[353] The relative burden of these costs, however, ( printed page 30138) could be smaller.^[354] Registrants exempt from section 404(b) compliance may choose to voluntarily obtain an ICFR auditor attestation. The rate of voluntary compliance with ICFR auditor attestation has generally been low. Up to about seven percent of exempt issuers voluntarily provided an ICFR auditor attestation from 2005 through 2011.^[355] In 2024, we estimate less than six percent of exempt registrants voluntarily complied.^[356] Low voluntary compliance indicates that most, but not all, exempt issuers deemed their net cost of compliance to outweigh the benefits. We caution, however, that registrants may not take into account all the benefits of attestation, in particular market-level benefits that accrue to parties outside the company, such as increases to investors' confidence.^[357] This caution aside, allowing companies to tailor their use of ICFR auditor attestation may allow them to make the optimal value-enhancing choice, as managers should be in the best position to assess their company's unique costs and benefits of compliance. The alleviation of these ICFR auditor attestation costs could positively influence additional companies to enter the public markets, creating additional transparency for investors, as well as investment opportunities for investors that would include additional investor protections than would otherwise be available if these companies chose to remain private.^[358] Under current rules, newly public companies have an exemption from the ICFR auditor attestation requirement for up to five years if they remain an EGC.^[359] After leaving EGC status, currently, registrants continue to receive this exemption as long as they remain an NAF. To the extent private companies that would qualify for EGC status under the current rules, and that are considering going public, consider potential compliance costs six years after their initial public offering and beyond when making a decision as to whether or not to go public, the proposed amendments could increase the attractiveness of the decision to go public.^[360] To the extent these private companies focus more on the compliance costs that would be incurred in their first few years after becoming publicly traded, the impact of the proposed rules on that company's decision to go public may be limited. For relatively large companies considering going public ( i.e., companies that would not currently qualify for EGC or NAF status after an initial public offering but would, under the proposed amendments, be NAFs after an initial public offering), the potential savings relative to the baseline from eliminating the ICFR auditor attestation requirement would accrue immediately upon going public. Registrants that are currently required to comply with the ICFR auditor attestation requirement but would be NAFs under the proposed amendments would likely consider the attestation accommodation positively in their decision whether to stay public.

b. Potential Costs of Eliminating the ICFR Auditor Attestation Requirement for Affected Registrants

Exempting affected registrants from the ICFR auditor attestation requirement may result in less effective ICFR over time. Some studies suggest that this could decrease the reliability of financial statements and the information available about their reliability, thus possibly resulting in a higher cost of capital and other operational effects. The 2011 Staff Study summarizes evidence on the benefits of auditor attestation of ICFR, concluding that “auditor testing of accelerated filers' controls has generally resulted in the disclosure of internal control deficiencies (“ICDs”) that were not previously disclosed by management, and the external auditor attestation appears to have a positive impact on the informativeness of internal control disclosures and financial reporting quality.” ^[361] Further, issuers that were not required to obtain an ICFR auditor attestation disclosed ineffective ICFR at a greater rate than those that were subject to such requirement, and newer studies demonstrate that this difference has remained consistent in recent years.^[362] Studies have found lack of effective ICFR to lead to more restatements, lower earnings quality, a higher rate of future fraud, more insider trading, and less accurate analyst forecasts.^[363] These factors, resulting in higher information asymmetry between investors and registrants, have been associated with higher cost of capital. ^[364] ( printed page 30139) More effective ICFR and more reliable financial reporting can also improve operations, such as investment efficiency and inventory tracking.^[365] To the extent registrants newly exempt from section 404(b) requirements forgo auditor attestation of ICFR, leading to less effective ICFR, negative impacts on financial controls, reporting quality, risk of fraud,^[366] and operations could occur. One study surveyed corporate insiders on section 404 compliance in 2008-2009. Respondents found section 404(b) compliance benefits to outweigh the costs, especially as they gained experience with section 404(b).^[367]

A recent study that examined the Commission amendment of Exchange Act Rule 12b-2 in 2020 presents a contrasting view.^[368] It found that exempting registrants from section 404(b) compliance did not result in a decline in ICFR quality or financial reporting quality. The amendment exempted issuers eligible to be an SRC that had less than $100 million in annual revenue. ICFR auditor attestation rates dropped significantly for issuers that were no longer required to comply with section 404(b), yet the study did not find significant differences in material weakness disclosures in section 404(a) management reports, nor in financial reporting quality, between issuers still required to comply with section 404(b) and those newly exempt.

To the extent forgoing ICFR auditor attestation leads to less reliable financial statements for some issuers, the proposed amendments could result in less efficient capital allocation across investment opportunities by investors or a less effective market for corporate control.^[369] Relatedly, section 404(b) compliance may play a role in improving overall investor confidence, encouraging investment in public markets, and thus exemptions could diminish investor confidence.^[370] Section IV.C provides additional discussion of these market-level factors. Any such market-level effects may be limited by the small percentage of the total value of traded securities that is represented by the affected issuers.

Importantly, the effects of an exemption from section 404(b) compliance likely vary across issuers of different types. For example, smaller, younger, loss-incurring issuers are more likely to have internal control deficiencies.^[371] The registrants, all current AFs or LAFs, that would be exempt from the ICFR auditor attestation requirement under the proposed rules would generally be larger and more established than the registrants currently receiving an exemption, and thus auditor testing of internal financial controls for these registrants may have fewer benefits with respect to detecting weak internal controls.^[372] Many of the registrants that would be newly eligible to receive the proposed accommodation are likely to have greater analyst and media coverage and institutional ownership, and thus less information asymmetry, than the segment of registrants that are currently subject to the exemptions, which could act as a source of discipline to maintain the reliability of financial statements and explain their lower incidence (as indicated in some studies) of internal control deficiencies.^[373] The potential costs described above from the absence of section 404(b) compliance could thus be mitigated (at least in part) by the scrutiny provided by these additional monitors.

In addition, newly exempt registrants will generally have had recent ICFR auditor attestations prior to the proposed reclassification, which could have two effects. First, any effects of the proposed amendments on company controls would be expected to be gradual (over the course of the fiscal periods following the registrant's transition to an NAF), as internal financial controls would have been subject to a recent auditor attestation. Second, some affected registrants may continue to voluntarily obtain ICFR auditor attestations to the extent they determine that its benefits are worth it to them. Some costs associated with section 404(b) compliance are one-time startup costs, and research has suggested ongoing compliance costs decline with experience.^[374] Thus the costs to continue compliance may be lower than the costs to begin compliance, resulting in more companies continuing to comply than it may appear from the discussion of benefits and costs in this economic analysis.^[375] This could, in turn, mitigate information loss for investors.

( printed page 30140)

4. The Expansion of the Subset of Registrants Eligible for Extended Periodic Report Filing Deadlines

The proposed amendments would expand the subset of registrants eligible for non-accelerated filing deadlines for periodic reports (90 days for Form 10-K and 45 days for Form 10-Q). For newly eligible NAFs that qualify as AFs (or LAFs) today, this would represent a 15-day (or 30-day) extension of the Form 10-K filing deadline. For newly eligible NAFs that qualify as either AFs or LAFs today, this would also represent a five-day extension of the Form 10-Q filing deadline.

We estimate the proposed amendments would result in 1,721 additional registrants (28.8 percent of all registrants) newly qualifying for NAF status and becoming subject to longer filing deadlines than they are currently.^[376]

Extending the filing deadlines for the affected registrants would provide these filers with additional timing flexibility in filing their periodic reports. The additional time to prepare and file periodic reports that would be afforded to the eligible registrants under the proposed amendments could be useful to some registrants in helping balance and prioritize other obligations on the management and finance teams, and may enable such registrants to prepare higher quality disclosures.^[377] The smallest among the newly eligible NAFs, in particular, are most likely to benefit from this additional flexibility. While smaller registrants tend to be more likely to exhibit difficulty in meeting the filing deadlines today,^[378] non-timely filing is generally perceived negatively by the market,^[379] so registrants attempt to prepare and file the periodic reports by the deadline, even if it entails significant cost. It is possible that some of the newly eligible NAFs already have disclosure management systems and processes in place structured around the existing filing deadlines and some of the newly eligible NAFs may decide to continue filing in accordance with those deadlines for different reasons, such as in anticipation of investor expectations of earlier reporting. Similar to the baseline, newly eligible NAFs would remain able to file periodic reports earlier than the filing deadline under the proposed amendments.^[380]

In turn, the extension of the filing deadlines for newly eligible NAFs could delay the availability of periodic disclosures to investors and other market participants. If a registrant were to continue to release earnings around the same time relative to year end or quarter end but file the periodic report at the newly applicable filing deadline, or cease releasing earnings altogether, more time would elapse until investors could obtain complete information about the registrant's financial condition. To the extent that investors derive value-relevant information from periodic reports (whether on their own or as information that complements the earnings release), the delayed availability of those reports could lead to less informed investment and voting decisions, and potentially less informative share prices, over the extension period. Importantly, while the proposed amendments would make longer filing deadlines for Forms 10-K and 10-Q available to newly eligible NAFs, they would not change the existing filing deadlines for Form 8-K, which would help ensure that investors would retain timely access to information about significant developments and changes affecting a registrant, potentially mitigating some of the effects of the proposed amendments on investors' ability to make informed investment and voting decisions.

As a gauge of the value of disclosures in periodic reports to investors, some research has examined share prices around the filing of periodic reports and found that share prices react to Form 10-K and Form 10-Q filings.^[381] At the

( printed page 30141)

same time, it is reasonable to assume that the disclosures in periodic reports become incrementally less important to the extent that key information filters into the marketplace through other channels over time ^[382] ( e.g., earnings releases,^[383] current reports on Form 8-K, and information production by institutional investors, analysts, and other intermediaries). Nonetheless, some research has indicated that information intermediaries actively rely on Commission-required disclosures in their information production efforts.^[384] Further, smaller NAFs may lack extensive institutional ownership or research coverage, resulting in less information production about such registrants by third-party intermediaries. While the extended filing deadlines will result in some loss of information about newly eligible NAFs and the increase in information asymmetry about such registrants, the magnitude of the effect is difficult to predict.

5. Extending SRC and Certain EGC Accommodations to All NAFs

The proposed amendments would extend certain disclosure accommodations to NAFs. As discussed in sections I and II.B.3 above, SRCs and EGCs today are afforded a number of disclosure and other accommodations that simplify reporting and disclosure requirements, and thus reduce burdens for smaller or emerging company filers. Under the proposed amendments, some filers that do not qualify as SRCs or EGCs under the existing requirements would be newly eligible for NAF status and could avail themselves of the scaled disclosure and other accommodations discussed below. We estimate that the proposed amendments would result in 204 registrants that are EGCs but not SRCs today (3.4 percent of all registrants), 1,787 registrants that are SRCs but not EGCs today (29.9 percent of all registrants), and 1,688 registrants that are neither EGCs nor SRCs today (28.2 percent of all registrants) being afforded the relief due to being classified as NAFs under the proposed amendments.^[385]

The proposed amendments are expected to benefit the newly eligible NAFs through a decrease in compliance costs.^[386] As discussed in detail in section II above, the proposed amendments would extend various disclosure accommodations pertaining to financial statements, executive compensation disclosures, and other disclosures outside the financial statements that are presently only available to SRCs and/or EGCs to all NAFs eligible under the expanded definition.^[387]

The scaled disclosure accommodations may also provide indirect benefits to the affected registrants. One potential indirect benefit could be a reduction in the proprietary costs of disclosure, to the extent that the disclosure required under the baseline could potentially reveal information about their business to competitors (insofar as that information is not already required to be disclosed in other filings, such as current reports on Form 8-K or registration statements). Another potential indirect benefit to the affected registrants may include increased ability of eligible filers' management teams to focus on business operations with incrementally less focus on investor relations issues related to more extensive periodic disclosures.

The proposed amendments to expand the number of registrants that would be eligible to qualify for scaled disclosure accommodations also are expected to decrease the amount of information available through public disclosures to investors and other market participants about eligible filers, which could result in costs of information loss to investors and the potential increase in the risk of less informed investment and voting decisions.^[388]

Some registrants that would be eligible as NAFs under the proposal might elect to continue to provide existing disclosures, based, for example, on their assessment of the costs and benefits for their company, which would result in more modest aggregate impacts (costs and benefits) of all of the proposed amendments. For instance, some may do so for continuity with existing reporting and disclosure management processes, out of concern over the capital market implications of scaled disclosure or in response to market pressures and investor expectations as a signal of their ( printed page 30142) commitment to transparency,^[389] or to manage legal risk concerns.^[390]

The costs and benefits specific to the individual scaled disclosure accommodations being proposed to be extended to newly eligible NAFs are discussed below.^[391]

a. Scaled Financial Disclosures

The proposed amendments would permit NAFs to rely on the financial statement disclosure requirements currently applicable to SRCs (with a few limited exceptions).^[392] These provisions are expected to reduce the costs of compliance with the financial statement requirements for newly eligible NAFs by reducing the scope and amount of financial statement disclosure required to be prepared by the registrant for periodic reports. Conversely, providing less granular financial statement disclosures may reduce the amount of information available to investors and other market participants (including securities analysts, lenders, suppliers, customers, etc.) to assess the company's financial condition and price the registrant's securities, potentially making it more difficult and costly for investors to make informed investment and voting decisions.

To the extent that the majority of filers pursuing a common equity initial public offering qualify for EGC status under the baseline,^[393] even if they do not qualify for SRC status, they already would be able to provide two years of financial statements in the registration statement under the current rules, which would reduce the economic effects of the proposed accommodation for NAFs of providing two, instead of three years of financial statements. For other filers, to the extent that a filer has been a reporting company for at least a year, and would have been required to prepare financial statements covering the additional historical year for a previously filed periodic report, which can be omitted in the subsequent report under the proposed amendments, the economic effects of the accommodation are also expected to be modest.

Today, if there are retrospective material changes to the statements of comprehensive income for any quarters within the two most recent fiscal years or any subsequent interim period for which financial statements are included or are required to be included, Item 302(a) requires non-SRC filers to provide an explanation of the reasons for such material changes and disclose summarized financial information related to the statements of comprehensive income.^[394] In contrast, SRC filers are not required to provide the information required by Item 302,^[395] and that accommodation would be extended to all NAFs under the proposal. To the extent that some of the numerical information that would be omitted can be inferred from comparing restated financials and prior filings (and for some restatements, Form 8-K disclosures as well), the incremental effect (cost) for investors of scaling this disclosure for the larger subset of newly eligible NAFs may be attenuated. Also, some disclosure content, including a qualitative explanation by the registrant about the restatement, would no longer be required for NAFs under the proposal.

The proposed amendments also would permit NAFs to apply the form and content requirements of Article 8 of Regulation S-X (with a few limited exceptions), permitting registrants to not comply with certain form and presentation requirements related to the financial statements, and to not disclose certain financial statement schedules and certain general notes to the financial statements, and to not provide separate financial statements of equity investees, as discussed in greater detail in section II above.^[396] To the extent that the described disclosures would be omitted from the periodic reports, the proposed amendments could both lead ( printed page 30143) to compliance cost savings for registrants and to a reduction in the information available to the investors. Also, some registrants may choose to continue to include such discussion in their periodic reports, for example, out of concerns over legal risk or investor scrutiny.

In addition, the proposed amendments also would permit NAFs to defer compliance with new or revised financial accounting standards until such time as a company that is not an issuer is required to comply with the standards, if such standard applies to companies that are not issuers, for a period of five years from initial registration, effectively extending the relief currently available to EGCs to all NAFs. This may decrease (or at least delay) compliance costs for NAFs that are newly eligible for this accommodation, but also potentially decrease the level of comparability of financial statements among reporting companies due to the expansion of the subset of filers that will have additional time to comply with new or revised financial accounting standards, which could result in the loss of information for, or costs to, investors. For purposes of both benefits and costs of this proposed provision, the subset of affected registrants is relatively limited, consisting of issuers that are NAFs under the proposed amendments and that either (i) went public as an EGC but lost the EGC status before the end of the five-year period ( e.g., due to fast revenue growth or debt issuance) or (ii) went public as a non-EGC.^[397]

b. Scaled Non-Financial and Business Disclosures

The proposed amendments also would allow NAFs, similarly to the scaled disclosure applicable to SRCs today,^[398] to, among other things, provide a more limited description of business disclosure; provide two (instead of three) years of MD&A; omit risk factor disclosure from periodic reports, omit the performance graph disclosure (except in the case of NAFs that are investment companies), and omit Item 305 of Regulation S-K; and forgo disclosure of certain payments made by resource extraction registrants.^[399] The accommodations involving scaled non-financial disclosures are expected to decrease the compliance costs for newly eligible NAFs through less management time dedicated to preparing periodic reports and lower costs of outside service professionals. In addition to the compliance cost savings, the non-financial disclosure accommodations may reduce the risk of proprietary information loss from competitors inferring potentially valuable information about the registrant's business (insofar as that information is not already required to be disclosed in other filings).

The proposed scaled disclosure accommodations would decrease the information available in public disclosures to investors in evaluating companies newly eligible for scaled disclosures, and their securities, and making investment and could make such evaluation and decision-making more costly. The economic effects would be lower to the extent that the information being omitted is provided in other filings or may be readily obtained elsewhere, which would mitigate both the costs and the effects on information availability. For instance, the effects of omitting the risk factor disclosure in periodic reports may be lower for NAFs that have recently filed registration statements, in which such disclosures would remain required. Relatedly, the economic effects of omitting the third year of MD&A discussion may be small to the extent that filers have been public for at least a year and have already provided in a prior filing the MD&A discussion for the year that can now be omitted, which today can be cross-referenced in the MD&A discussion. In a similar vein, the economic effects of most NAFs being able to omit the performance graph may be small given the relative ease, for registrants and investors, of compiling that information from outside market data sources, should it affect investor decision making.

While the individual cost savings associated with the accommodations may be modest, the overall impact could be to provide a simpler and more streamlined framework for periodic reporting disclosure which may in aggregate reduce the costs of disclosure preparation for NAFs. Conversely, the cumulative effects of scaling the overall amount of disclosure provided to investors under the proposed amendments may have some net adverse effects on the availability of information for investor decisions.

c. Scaled Executive Compensation and Corporate Governance Disclosures and Related Accommodations

As discussed in detail in section II.B.3 above, the proposed amendments would extend the option to provide scaled executive compensation, corporate governance, and related disclosures currently available to SRCs (and, generally, EGCs) to the broader subset of filers that would be newly eligible as NAFs.

Providing these proposed accommodations relating to the executive compensation disclosure requirements of Item 402 of Regulation S-K and certain corporate governance disclosure requirements to NAFs could result in direct benefits to the affected registrants in the form of reduced compliance costs. These disclosure accommodations also may result in indirect benefits for the affected registrants, by decreasing the risk of sharing sensitive information about executive retention and compensation strategies with competitors; by decreasing investor relations costs and time dedicated to addressing market participants' questions about these disclosures; ^[400] and by decreasing the risk of potentially inefficient compensation decisions driven by concerns over perceptions of executive pay (for instance, on the part of employees, media, shareholder activists, or proxy advisors). These benefits may be attenuated to the extent that certain numerical and narrative information about executive pay would remain disclosed in periodic reports, and to the extent that third-party sources gather a variety of market and peer information about executive compensation.

The proposed disclosure accommodations may impose costs on investors. To the extent that insider and shareholder incentives are not fully aligned ( e.g., moral hazard and agency problems are present), scaled executive compensation disclosures could make it more difficult to observe managerial incentives and potentially increase moral hazard.^[401] The proposed ( printed page 30144) amendments may also affect shareholder ability to make informed investment and voting decisions. The proposed elimination of the requirement to conduct say-on-pay votes, say-on-pay frequency votes, and say-on-golden-parachute votes (henceforth, collectively, the “SOP votes”) ^[402] for NAFs is expected to decrease the effect of the proposed scaled disclosures on voting decisions to the extent that shareholders view current executive compensation disclosures as informative for SOP votes under the baseline (although shareholders' ability to make informed voting decisions with respect to other votes, such as votes on director elections or shareholder or management proposals, may still be affected). The continued availability of other executive compensation and governance-related disclosures in registrant filings (such as annual reports on Form 10-K and proxy and information statements) under the proposal could mitigate some of these effects. Further, some of the information that would no longer be required to be disclosed may be obtained or approximately estimated from other disclosures by the registrant or third-party sources.^[403] The proposed amendments may also indirectly result in decreased engagement with shareholders.

Some NAFs may opt to continue providing existing disclosures (for instance, for continuity with their existing reporting processes or in anticipation of potential scrutiny from shareholders,^[404] other market participants, or proxy advisory firms), in which case the economic effects on investors described above may be lessened.

The economic effects discussed above are expected to apply to all of the proposed executive compensation and corporate governance disclosure accommodations. Below we discuss additional cost-benefit considerations specific to individual provisions.

Eliminating the requirement to provide the pay versus performance disclosure under Item 402(v) of Regulation S-K may reduce the amount of information available to investors about the extent of alignment of named executive officers' compensation incentives.^[405] Investors in companies that no longer provide the pay versus performance disclosure may instead evaluate compensation information in the summary compensation table in conjunction with performance metrics based on financial statements and/or return data available from market sources for the company and its peers, to evaluate the relation between executive pay and the company's performance, which can limit the economic effects of the proposed exemption.^[406] Shareholders would incur the costs of gathering or accessing such information, however.

Under the proposal, NAFs would also be permitted to omit disclosure of policies and procedures for the review, approval, or ratification of related party transactions (“RPTs”), currently required of all non-SRC filers under Item 404 of Regulation S-K.^[407] This is similarly expected to decrease some costs for registrants, including small direct cost savings related to compiling the disclosure and the potentially greater indirect cost reductions ( e.g., reputational or investor relations costs for registrants that have fewer policies and procedures related to the review of RPTs). In turn, the loss of this disclosure may make it incrementally harder for shareholders to infer the extent of governance safeguards with respect to RPTs for affected registrants. However, the continued application of the Item 404 requirement to disclose RPTs that meet the disclosure threshold ^[408] may enable market participants to perform their own analysis of RPTs,^[409] which may alleviate some of these economic effects; however, under the proposal, investors would incur the costs of analyzing the implications of these transactions and the registrant's corporate governance.

In addition, the proposed amendments would apply a single threshold for RPT disclosure to all filers and eliminate the multiple RPT disclosure thresholds currently applicable to SRCs under Item 404 ^[410] (the lesser of $120,000 or one percent of total assets). The harmonization of this requirement would simplify reporting and disclosure requirements and potentially make filing disclosures more comparable across filers. The proposed amendment also would mean that RPTs of filers that are SRCs today and have total assets below $12 million (such that ( printed page 30145) the one percent of total assets would fall below $120,000, the RPT reporting threshold applicable today to non-SRCs) would no longer meet the RPT disclosure threshold. While this change is unlikely to affect RPT disclosure for most NAFs, it may incrementally decrease compliance costs for some low-asset SRCs.

Under the proposal, NAFs also would be permitted to omit disclosure of compensation committee interlocks and insider participation, which is currently required for non-SRCs in Item 407(e)(4).^[411] This proposed amendment may reduce direct compliance costs as well as some indirect costs of the disclosure (such as revealing potentially valuable competitive information about internal governance of the company and top personnel and making director appointment decisions in anticipation of the market scrutiny of the disclosure that might differ from the registrant's optimal board composition). The loss of this disclosure might in turn make it harder for shareholders to weigh the extent of incentive alignment of compensation committee members with the interests of the registrant's shareholders in their setting of executive compensation, as well as potential agency conflicts due to these committee members being insiders or affiliated directors of other companies or having apparent quid-pro-quo relationships through seats on other companies' boards.^[412] Some of these costs and benefits may not be applicable to registrants listed on major U.S. exchanges, for which the 2012 Commission rule implementing the Dodd-Frank Act requirements, and accordingly, corporate governance listing standards of individual exchanges, require compensation committee independence.^[413] These effects may also be smaller to the extent that investors can refer to third-party sources that compile profile information about board members (including information about their current and historical employment and affiliations); Item 401 disclosures regarding the background of directors and executive officers; company websites; or online postings by individual directors, which may enable a fairly comprehensive picture of the compensation committee composition. Under the proposal, shareholders would incur a potential additional cost of gathering or accessing such information, which may be less standardized across filers than the existing disclosure.

The proposed amendments also would exempt NAFs from the pay ratio disclosure requirement in Item 402(u) of Regulation S-K.^[414] When adopting this disclosure rule, the Commission stated that it believed that Congress intended section 953(b) of the Dodd-Frank Act to enhance the executive compensation information available to shareholders that they might find relevant and useful when exercising their say-on-pay voting rights under section 951 of the Dodd-Frank Act.^[415] However, as the proposed amendments also would exempt NAFs from the SOP vote requirement, to the extent shareholders review pay ratio information when making their SOP vote decisions, the resulting cost to shareholders from the information loss may be limited.^[416] Investors in companies that no longer provide the pay ratio disclosure or the disclosure of median worker pay may analyze the company's executive compensation (available in other disclosures) in conjunction with data on average worker pay in the registrant's industry (potentially available in industry sources), which can limit the economic effects of the proposed exemption, although investors would incur costs to gather and analyze this information.^[417] The costs to investors of eliminating the pay ratio disclosure requirement for NAFs under the proposed amendments would be smaller if pay ratio information is not used to value shares of a company, in which case the information loss would be incremental.

The proposed amendments also would exempt NAFs from the requirement to conduct SOP votes and to provide related disclosure.^[418] The ( printed page 30146) proposed amendments are expected to benefit the affected registrants through cost savings. Direct costs of the SOP votes to registrants include the costs of preparation of proxy statement disclosure and opportunity costs of managerial time to interpret and discuss voting results and potentially manage additional investor relations concerns arising from such votes. The proposed amendments may also have indirect economic effects. Although SOP votes are non-binding, boards face market scrutiny following SOP votes.^[419] To the extent that shareholders participating in SOP votes are less informed than compensation committees, and the scrutiny associated with SOP votes leads to inefficient executive compensation decisions, the proposed accommodation could benefit shareholder value. On the other hand, to the extent that SOP votes are well-informed and strengthen the alignment between executive compensation incentives and shareholder value and serve as a check on moral hazard and agency problems at some companies,^[420] the proposed accommodation could decrease shareholder value. The proposed amendments may also result in decreased engagement with shareholders. Academic studies have found somewhat mixed results as to the impact of the Dodd-Frank requirement to conduct SOP votes on company value.^[421] Overall, the economic effects of the proposed accommodation with respect to SOP votes may be limited. Shareholder views ( e.g., in the form of investment decisions ^[422] or votes on director elections or on shareholder proposals related to executive pay) may prompt some registrants to continue to hold SOP votes even when no longer required, or to maintain existing shareholder engagement and executive pay practices even absent the requirement to conduct SOP votes.

6. Extending Filing Deadlines for the Smallest NAFs

The proposed amendments would also establish a new filer subcategory, SNFs, which is composed of NAFs with total assets not exceeding $35 million as of the end of each of their two most recent second fiscal quarters. These filers would be afforded additional time to file periodic reports on Forms 10-K and 10-Q (30 days and five days, respectively). We estimate that 1,072 registrants (17.9 percent of all registrants and 22.2 percent of NAFs under the proposed amendments) would qualify as SNFs under the proposed amendments.^[423] The additional time to file periodic reports is expected to enhance an SNF's ability to meet reporting and disclosure requirements and provide additional time for preparing their disclosures. While such filers still would incur the costs of preparing the same periodic reports as required under the baseline, additional time to file may incrementally ease the challenges, and thus reduce the costs incurred, due to the time pressures of filing deadlines, particularly to the extent that their executive and finance teams may be smaller than those of larger registrants. Additional time to file may also allow these smaller registrants to more easily engage auditors without being crowded out by larger issuers during busy periods around the current reporting deadlines.^[424]

In turn, extending the filing deadlines as proposed would allow these registrants to take more time to file the required periodic disclosures, which may accordingly increase the extent of information asymmetry and costs to investors. This difference may be smaller to the extent that filers that would qualify as SNFs today are disproportionately more likely to file non-timely periodic reports, potentially indicating difficulties for some categories of registrants in complying ( printed page 30147) with the existing filing deadlines.^[425] To the extent that some SNFs are concerned about the potential capital market implications of extended time to file reports or seek to respond to market pressures and investor expectations, or to manage legal risk concerns,^[426] they may elect to voluntarily file periodic reports earlier than the extended deadline available to SNFs. Importantly, while the proposed amendments would make longer filing deadlines for Forms 10-K and 10-Q available to SNFs, they would not change the existing filing deadlines for Form 8-K, which would help ensure that investors retain timely access to information about specified significant developments and changes affecting an issuer, potentially mitigating some of the effects of the proposed amendments on investors' ability to make informed investment and voting decisions.

7. Updating Small Entity Definition

As discussed in section II.E, the Commission is also proposing to update its small entity definitions under 17 CFR 230.157(a) and 17 CFR 240.0-10(a) for purposes of the RFA. The proposed amendments would raise the total asset threshold in each of the definitions of a small entity (other than an investment company) from $5 million to $35 million, as well as harmonize the small entity definitions for purposes of the Securities Act and the Exchange Act by conditioning the amended definitions only on the level of assets in both instances and eliminating the additional offering size condition that is a part of the existing small entity definition for purposes of the Securities Act (but not for purposes of the Exchange Act).^[427] The proposed changes would streamline and modernize the definitions relative to the current definition and facilitate more meaningful analysis by the Commission and other regulators of the impacts of securities market regulations for purposes of the RFA.

The Commission is required to determine if a rulemaking is likely to have a “significant economic impact on a substantial number of small entities” under the RFA.^[428] Accordingly, in applicable rulemakings, the Commission's definitions of small entities determine the scope of the Initial Regulatory Flexibility Analysis (“IRFA”) and Final Regulatory Flexibility Analysis (“FRFA”). The proposed definitions are expected to enhance the Commission's analyses of the specific regulatory challenges faced by small entities by expanding the scope of the analyses that the Commission conducts under the RFA. These analyses would, in turn, better inform the Commission of the regulatory impacts faced by small entities so that it may consider adapting its rulemaking accordingly. To the extent such adaptations would occur in future rulemakings, the use of the amended definitions of small entities in RFA analyses could result in different benefits and costs of such rulemakings. For example, if the Commission, informed by the enhanced RFA analyses, determined to scope fewer small entities into future rulemakings or tailor obligations imposed by such rulemakings differently for small entities, there could be fewer compliance costs imposed on such entities. However, the proposed amendments would not have any direct economic benefits or costs to affected parties since the small entity definition for purposes of the RFA would not entail any differences in reporting requirements, or exemptions from such requirements, under either the Securities Act or the Exchange Act. Relatedly, we do not anticipate that the proposed amendments would have any direct effects on efficiency, competition, or capital formation because, as discussed above, they would have minimal direct economic impact.

Based on calendar year 2024 data, if we were to set the small entity threshold at $35 million in total assets, we estimate that 1,419 registrants (excluding issuers of asset-backed securities, investment companies, and BDCs) would be small entities. The number of small entities as determined by the proposed threshold would be smaller (larger) if the asset threshold were decreased (increased) to a level below (above) the proposed $35 million.^[429] The number of small entities as determined by the proposed threshold of $35 million is expected to gradually fall over time due to the effects of inflation.

8. Additional Considerations

a. Differential Impacts Across Industries

EA Table 8 provides a breakdown of the potential impact of the proposed rules by industry. Listed are the industries in the Fama-French 49 classification.^[430] Column 1 gives the number of registrants in each industry that are LAFs under the baseline. Column 2 estimates the number of these registrants that would become NAFs under the proposed rules. Column 3 divides column 2 by column 1, resulting in the percentage of current LAFs in each industry that would become NAFs under the proposed rules. The industries are sorted from highest to lowest percentage change.

( printed page 30148)

( printed page 30149)

Some industries are relatively more commonly represented than others among the population of newly eligible NAFs, potentially as a function of the distribution of filer sizes across industries. It is possible that the proposed amendments would therefore have differential effects on various sectors, and ascertaining the effects on competition would require more precise definition of markets than provided in EA Table 8. As a caveat, the categorization of registrants by industry codes may be imprecise because registrants are categorized by their primary business models without accounting for ancillary business. In addition, emerging and small companies may still have evolving business models so their proper categorization may be in flux. It is also possible that the industry distribution would evolve over time subsequent to the proposed amendments as a function of industry economic cycles, which affect valuations, and in turn, public float.

Subject to these same caveats, EA Table 9 provides an industry breakdown of the registrants potentially eligible for the new SNF subcategory.^[431] As with newly eligible NAFs, some industries are relatively more commonly represented than others among the population of SNFs, potentially as a function of the distribution of filer sizes across industries. It is possible that the proposed extended filing deadlines afforded to SNFs would therefore have differential effects on various sectors.

( printed page 30150)

( printed page 30151)

b. Other Commission Proposals

The Commission recently proposed to make quarterly periodic reports voluntary, irrespective of registrants' filer status.^[432] The Semiannual Proposing Release would permit registrants to provide a single semiannual report instead of three quarterly reports each year and could potentially interact with some of the economic costs and benefits of this proposal, specifically, in the context of the filing deadline extension and scaled disclosure for quarterly periodic reports. On the one hand, the Semiannual Proposing Release could partly reduce the economic effects of this proposal. From the benefit perspective, the decrease in the required number of quarterly reports, if adopted in accordance with the Semiannual Proposing Release, would potentially decrease the projected benefits of the current proposal to newly eligible NAFs in terms of greater flexibility or compliance cost savings from the filing deadline extension ^[433] and scaled disclosures because the accommodations would apply to only a single semiannual report and one annual report instead of three quarterly reports and one annual report. In turn, from the cost perspective, if the Semiannual Reporting proposal is adopted and filers would be required to file fewer periodic reports, and provide less information overall, it could lessen some of the economic cost of information delay and/or loss that is incremental to this proposal, which narrows the scope of certain disclosures and extends the filing deadlines for periodic reports for affected filers. However, the Semiannual Reporting Proposal would not affect those impacts of the proposed amendments that stem from the scaling, and filing deadline extension, with respect to annual reports.

On the other hand, the economic effects of regulatory relief in the two proposals may amplify each other. From the benefit perspective, the disclosure relief accommodations in this proposal and in the Semiannual Proposing Release could complement each other by increasing the attractiveness of becoming or remaining a public company, to the extent that overall regulatory burden is a factor in these decisions.^[434] From the cost perspective, the effects of disclosure relief accommodations in this proposal and in the Semiannual Proposing Release could similarly combine to amplify information asymmetries faced by investors, who would receive less extensive, more delayed, and less frequent periodic disclosures if both proposals are adopted.

c. Auditing Industry Impact

Under the proposed amendments, fewer registrants (roughly 1,596 registrants) would be required to obtain an ICFR auditor attestation. To the extent this change impacts the scope and timing of audit procedures at newly identified NAFs, auditors could experience a decline in revenues. This effect could be amplified by the Semiannual Proposing Release that would reduce the number of quarterly reviews each fiscal year from 1 review for each of the first three fiscal quarters (3 in total) to only 1 review for the first 6 months of each fiscal year, but only for registrants that choose to file on a semiannual basis. Further, the reduction in work related to ICFR attestation could encourage larger audit firms to pursue audit engagements that they otherwise might have forgone under the baseline, for example, because of resource constraints that are diminished with the reduction in work related to ICFR. This could result in larger audit firms out-competing smaller firms for the audits of certain new NAFs. Thus, the proposed amendments could increase concentration in the auditing industry by increasing the market share of the largest audit firms.

9. Aggregate Monetized Benefits and Costs

Throughout this economic analysis, we have estimated monetized benefits and costs per filing. In this section, we present aggregate measures of these monetized effects. These totals include only benefits and costs that are monetized in the economic analysis and thus do not encompass all of the proposed amendments' benefits and costs.

a. Annual Monetized Benefits and Costs

EA Tables 9 and 10 report the benefits and costs, respectively, that are monetized in this economic analysis, on a per-filing basis and in the aggregate across all affected filings each year. We are able to quantify the direct benefits and costs of the rule that are due to the compliance cost savings and increases, respectively. To aggregate these monetized effects we use estimates of the number of affected filings and burdens under the Paperwork Reduction Act in section V. As a caveat, these are averages, and individual registrants' costs and benefits may differ, depending on their current status and relief already available to them, the extent to which they elect to avail themselves of the proposed compliance accommodations, and their existing compliance and reporting practices and service providers and costs associated with them.

We estimate that the total aggregate annual monetized benefit is $1,874,534,145.

( printed page 30152)

( printed page 30153)

b. Present Values and Annualized Values of Monetized Benefits and Costs

Consistent with the requirements of Executive Order 12866, the Commission reports estimated total monetized benefits and costs for all affected entities in two additional ways specified in OMB Circular A-4.^[435] The two presentations are intended to address the fact that the various benefits and costs of the proposed amendments would not accrue at the same point in time; rather, benefits and costs that accrue sooner are generally more valuable than those that occur later in time.^[436]

We report (1) the present values of expected benefits and costs that are monetized in our Economic Analysis, aggregated across all affected entities, over a 10-year time horizon, starting in 2026, as well as (2) the annualized values over the same time horizon that are derived from the present values. This time horizon represents the period over which the principal benefits and costs that are monetized in the Economic Analysis are expected to accrue.^[437] The present values and annualized values account for the timing of benefits and costs through discounting, which is a procedure that accounts for the time value of money.^[438]

EA Table 11 reports the present values of the aggregate monetized benefits and costs from EA Tables 9 and 10, respectively. The analysis uses annual real discount rates of 3 percent and 7 percent over a 10-year time horizon, starting in 2026.^[439] We estimate that the present value of total monetized benefits is $16,228,236,426 using a three percent discount rate and $13,618,957,772 using a seven percent discount rate. We estimate that the present value of total monetized cost is $639,941 using a three percent discount rate and $537,047 using a seven percent discount rate.

( printed page 30154)

EA Table 12 reports annualized aggregate monetized benefits and costs using real discount rates of three percent and seven percent over a 10-year horizon.^[440] The lump sum present values of aggregate monetized benefits and costs reported in EA Table 11 are converted in EA Table 12 into a constant stream of annualized benefits and costs over a 10-year time horizon, starting in 2026.^[441] Because the annual aggregated monetized benefits and costs reported in EA Tables 9 and 10, respectively, are identical in every year of the 10-year time horizon and because there are no initial benefits or costs at Time 0, the annualized aggregate monetized benefits and costs in EA Table 12 are the same as the annual aggregate monetized benefits and costs in EA Tables 9 and 10, respectively.^[442] We estimate that annualized total monetized benefits are $1,874,534,145 per year using both a three percent discount rate and a seven percent discount rate. We estimate that annualized total monetized costs are $73,960 per year using both a three percent discount rate and a seven percent discount rate.

C. Anticipated Effects on Efficiency, Competition, and Capital Formation

The proposed amendments and associated cost savings for affected registrants ^[443] are expected to enhance shareholder value and improve economic efficiency. The anticipated decrease in compliance costs, as well as the reduction in indirect costs, would decrease such registrants' operating expenses and increase their cash flows realized per dollar invested by the registrant in its business. The registrants may choose to redeploy increased internal cash flows toward productive investment and growth opportunities, improving allocative efficiency.^[444] Increased profitability is also expected to increase shareholder value. Increases in shareholder value (which accrue to ( printed page 30155) shareholders in those registrants) could encourage additional investor interest in such registrants, thus improving liquidity and capital formation.^[445]

Under the proposed amendments, the information required to be provided by NAFs in their public disclosures would be reduced. Information asymmetries and agency costs generally are more prevalent where investors have reduced transparency about managerial actions or the registrant's investment opportunities.^[446] To the extent that investors and other market participants use the disclosures proposed to be scaled and cannot obtain comparable information from other sources (including other disclosures in periodic and current reports or third-party sources), information asymmetry between investors and company insiders (and companies) could increase. Information asymmetries limit investors' ability to value registrants' securities, decreasing the informational efficiency of prices and weakening investor protection.^[447] If the proposed amendments increase the level of information asymmetry or agency costs at some registrants, then investors may discount the price they are willing to pay for a registrant's shares, increasing the cost of capital for the registrant.^[448] These registrants could also have more difficulty gaining investor confidence when raising new financing, thus incurring a higher cost of capital.^[449] This could cause these registrants to forgo valuable investment opportunities.^[450] A registrant in such a situation and/or other NAFs could potentially decide to voluntarily continue to provide existing disclosures.^[451] In addition, at the market level, the use of scaled disclosure may decrease aggregate information benefits that can accrue to investors and other market participants (including peer companies, and information intermediaries that may use disclosures about other companies for valuations, research coverage, and comparing investment options).^[452]

The scope of the proposed amendments should limit such effects, however. Together the affected registrants account for around six percent of total market public float, and those registrants would remain subject to SRC and EGC levels of disclosure. Also, to the extent that, but for the proposed amendments, some issuers would have remained private (and been subject to no, or very few, disclosure requirements), these issuers would become subject to Commission public reporting requirements under the proposed amendments.

The proposed rules are expected to increase competition by leveling the regulatory burden and improving comparability across more issuers. Currently, there are many different combinations of filer status with different regulatory burdens. For example, registrants classified as AFs or NAFs could also be SRCs, EGCs, both, or neither.^[453] Under the proposed amendments, affected issuers would only be LAFs or NAFs, where some NAFs would be SNFs. Fewer categories of filer status mean that more issuers would share the same regulatory requirements and lower regulatory burden, especially since most (roughly 80 percent) of the issuers would be NAFs. This could help promote competition by reducing the degree to which regulation may shift the competitive balance towards firms with lighter regulatory burdens. Further, a lower regulatory burden could benefit affected registrants where they compete with private companies and certain FPIs with lighter regulatory burdens.

Smaller registrants that currently benefit from scaled regulatory requirements ( e.g., SRCs and EGCs) would no longer have scaled regulatory requirements compared to many other (typically larger) companies. These smaller registrants are thus expected to be subject to heightened competition. Also, the regulatory burdens on registrants with LAF filer status under the proposed amendments would remain unchanged, and higher than on other registrants. This could disadvantage them competitively and also encourage registrants to stay below the $2 billion threshold for the LAF filer status to avoid higher costs, thus potentially distorting investment and ( printed page 30156) financing incentives.^[454] However, LAFs are larger, more established companies that disclose more information to investors in their public disclosures. These factors may make these registrants attractive to investors as investment opportunities, which would lower their cost of capital and thereby provide them with competitive advantages.

The proposed amendments would apply to—and thus, reduce the compliance costs for—BDCs,^[455] but not registered closed-end funds (“CEFs”). To the extent that BDCs and some registered CEFs compete in the same markets (for the same investors, or for the same portfolio company investment opportunities), the proposed amendments, if adopted as proposed, could result in competitive advantages for BDCs (particularly, smaller BDCs) relative to comparable registered funds.

The proposed amendments would apply to domestic issuers and FPIs that file on domestic forms but not to FPIs that file on forms designated for FPIs.^[456] FPIs that file on FPI forms would continue to follow existing reporting requirements. To the extent that some FPIs that file on FPI forms compete in the same markets as domestic form filers but would not obtain additional relief under the proposed amendments, the proposed amendments could result in competitive disadvantages for such FPIs. This effect is likely to be more pronounced for those FPIs filing on FPI forms that are similar in size to the domestic filers that become eligible for NAF relief under the amendments. Some FPIs that file on FPI forms such as Form 20-F and that would otherwise qualify as NAFs under the amended definition may in turn elect to file on Form 10-K to avail themselves of the NAF relief, to the extent that the compliance cost savings from NAF status outweigh the additional compliance obligations of filing on domestic forms.

The proposed amendments may also have effects on capital formation. While lower compliance costs are one of several factors in the initial public offering decision, if the proposed amendments incentivize some companies to enter, or remain in, public capital markets, they would reduce the cost of access to registered initial and follow-on offerings, improving access to capital and/or the ability to optimize the cost of capital, although the magnitude and direction of the effect is difficult to predict. To the extent the number of reporting companies grows, investors would be offered a broader array of publicly traded investment options with greater disclosure and transparency, which also tend to be more liquid (compared to exempt private securities offerings by issuers that are not reporting companies), potentially enabling greater diversification and more efficient capital allocation within investor portfolios. The proposed amendments may have a greater impact on registrants (newly qualified NAFs) that would not qualify for SRC or EGC status under the baseline. Thus, some potential new public companies incentivized by the proposed amendments could be larger than typical initial public offering candidates, which historically have tended to be EGCs.^[457]

D. Reasonable Alternatives

1. LAF Public Float Threshold

As an alternative, we considered raising or lowering the threshold for the definition of LAF relative to the proposed $2 billion public float threshold. Raising (or lowering) the LAF public float threshold under this alternative, relative to the proposed threshold, would result in larger (or smaller) aggregate economic effects of the rule, including costs and benefits, compared to the proposal, in proportion to the larger (smaller) population of filers eligible for scaled disclosure and other proposed regulatory relief. EA Table 13 below provides the number of LAFs and share of public float they would represent, each as calculated under alternative thresholds.

2. Seasoning Requirement

The proposed amendments would both amend the threshold (as discussed above) and expand the seasoning period to qualify as an LAF from 12 months to 60 months, thus filers that exceed the $2 billion proposed public float threshold but that have not been reporting for at least the preceding 60 calendar months ( printed page 30157) would remain as NAFs. As an alternative, we considered amending the LAF threshold without changing the seasoning requirement for LAF status. Under this alternative, the number of registrants continuing to be subject to the requirements associated with LAF reporting would increase, compared to the proposal, from approximately 1,146 (19.2 percent of all registrants) to 1,234 (20.6 percent of all registrants), since new reporting companies that experience quick increases in public float since going public would not qualify as NAFs under the alternative, whereas they would qualify as NAFs, regardless of the size of their public float, for at least 60 calendar months under the proposal. This alternative would have extended the benefits of the proposed regulatory relief to a smaller subset of filers during a crucial stage of their growth as public companies, compared to the proposal. This alternative also would have reduced the subset of filers filing scaled and/or delayed disclosures, which may have accordingly reduced the information asymmetry and costs to investors, compared to the proposal.

3. Regulatory Accommodations for NAFs

The proposed amendments extend a number of regulatory accommodations to NAFs. As an alternative, we considered providing only a subset of accommodations (for example, only disclosure accommodations, or only periodic report timing accommodations) to NAFs. This alternative would result in smaller cost savings, both for individual filers and for filers in the aggregate, and potentially smaller costs to investors and capital markets, compared to the proposal. The respective costs and benefits of the proposed accommodations are discussed in detail in section IV.B above.

The proposed amendments do not further extend periodic report filing deadlines (from current NAF deadlines) for all newly-eligible NAFs, only for SNFs. As an alternative, we considered extending the filing deadlines for all NAFs. Compared to the proposal, such an alternative would likely result in greater compliance cost savings and gains in flexibility for affected NAFs, and correspondingly, in larger costs to investors and capital markets from the changes in timing for filing of such filers' periodic reports.

4. SNFs

The proposed amendments define SNFs as NAFs with assets not exceeding $35 million. As an alternative, we considered other measures (such as public float or revenues), or other (lower or higher) asset thresholds for the SNF definition, as discussed in greater detail in section II.C and the accompanying table.^[458] Depending on whether the number of SNFs under the alternative definition is higher or lower, the number of filers that would be afforded greater flexibility in the preparation of financial statements and other disclosures required in periodic reports and the potential cost savings for such filers would be higher or lower, respectively, relative to the proposal. In turn, a potentially higher (lower) number of SNFs would result in more (fewer) registrants whose investors will face delays in the availability of periodic reports, relative to the proposal.

As another alternative, as discussed in section II.C, we could have defined SNFs as NAFs that are not registered under section 12(b) (1,256 registrants) or as NAFs that do not have a class of common equity securities listed for trading on a national securities exchange (1,490 registrants). Such alternative definitions could be less sensitive to fluctuations in a registrant's assets than the proposed definition. They also would tailor longer filing deadlines to issuers that are either traded on marketplaces where other factors already contribute to lower liquidity and market efficiency, or that are not traded on any marketplace. Compared to the proposal, the alternative definitions would provide additional time to file for unlisted registrants with somewhat larger assets but at the same time would not provide additional time to file for low-asset filers with higher valuations that attained an exchange listing.

The proposed amendments would extend the deadlines for SNFs to file their periodic reports, giving SNFs an additional 30 days to file their Form 10-Ks and an additional five days to file their Form 10-Qs. As discussed above, recently, the Commission proposed to amend the rules related to periodic reporting under the Exchange Act to allow certain reporting companies to meet their interim reporting obligations either by filing quarterly reports or semiannual reports at the election of the company.^[459] To the extent the amendments proposed in the Semiannual Proposing Release are not adopted as proposed, as an alternative, we considered allowing SNFs to meet their interim reporting obligations either by filing quarterly reports or semiannual reports at the election of the company.^[460] This alternative would extend additional flexibility and compliance cost savings to SNFs, compared to the proposal. Conversely, a reduction in the frequency of interim reporting could result in delayed disclosure of material information, reduced comparability, and some lost information. Under this alternative, SNFs could potentially consider the tradeoffs between the cost savings of providing less frequent interim reporting and the market benefits of providing more frequent interim reporting and choose the frequency of reporting that best fits their circumstances.^[461]

E. Request for Comment

We request comments on all aspects of our economic analysis, including the potential costs and benefits of the proposed amendments and alternatives, and whether the proposed amendments, if adopted, would promote efficiency, competition, and capital formation. Commenters are requested to provide empirical data, estimation methodologies, and other factual support for their views, in particular, on the estimates of costs and benefits. In addition, we request comments on the following:

(41) Would the proposed regulatory relief reduce direct compliance costs for registrants? What would be the largest driver(s) of the reduction in compliance costs under the proposal? For example, would the proposed amendments result in a reduction of auditing costs and if so, what would the amount of cost savings be? Would the proposed regulatory relief reduce indirect costs of reporting obligations for registrants? What specific costs? What would be the effects of the proposed regulatory relief on efficiency, competition, capital formation, and investor protection? Would the affected registrants redeploy the funds freed up from compliance costs in their businesses?

(42) Would the proposed amendments and the anticipated decreases in direct and indirect cost of reporting obligations have an effect on companies' decisions to become, or remain, reporting companies? Why or why not? ( printed page 30158) Are there any modifications to the proposed amendments, or additional accommodations not currently proposed, that could help to encourage companies to enter or remain in the public markets?

(43) What would be the effects of the proposed amendments to filer status definitions on investors, market participants and other parties, including the auditing industry and the capital markets? What would be the costs to investors of the reduction in information disclosed under the proposal and in assurance with regard to ICFR of registrants that avail themselves of the proposed exemption from the auditor attestation requirement?

(44) Are registrants that would be eligible for the accommodations under the proposed amendments likely to take advantage of the accommodations, or are they likely to continue to provide existing disclosures, obtain ICFR auditor attestation, and/or comply with non-NAF filing deadlines, on a voluntary basis? What specific accommodations and why?

(45) Does the increasing complexity in financial reporting, due in part to the increasing volume of electronic data and greater reliance on IT systems, enhance the relevance of ICFR to reliable financial reporting? If so, does this trend have any impact on the costs and benefits from the proposed exclusion of NAFs from the ICFR auditor attestation requirement?

(46) Are SNFs likely to benefit from the proposed extended filing deadlines? Are there alternatives to approaching regulatory simplifications and relief for the smallest NAFs that we should consider, and what would be their benefits and costs? Are there alternative SNF definitions or thresholds we should consider? What would be the effects of the proposed extended filing deadlines on investors in SNFs, other market participants, and the capital markets, particularly with respect to the timing of disclosure of information in connection with the proposed extension to filing deadlines?

(47) Should we consider alternative size thresholds and/or size measures for filer statuses to better tailor the disclosure requirements and regulatory relief for smaller versus larger registrants?

(48) Would the proposed amendments have significantly different economic effects for some types of issuers as compared to others? For example, would the proposed amendments have different effect on BDCs, face-amount certificate companies, etc.? Would the proposed amendments have different impacts on FPIs, and would there be potential implications for US listings?

V. Paperwork Reduction Act

A. Summary of the Collections of Information

Certain provisions of our rules and forms that would be affected by the proposed amendments contain “collection of information” requirements within the meaning of the Paperwork Reduction Act (“PRA”).^[462] We are submitting the proposed amendments to the Office of Management and Budget (“OMB”) for review and approval in accordance with the PRA.^[463] The hours and costs associated with preparing, filing, and sending the forms and retaining records constitute reporting and cost burdens imposed by each collection of information. An agency may not conduct or sponsor, and a person is not required to comply with, a collection of information requirement unless it displays a currently valid OMB control number. The titles for the collections of information are:

• Form 10-K (OMB Control No. 3235-0063);
• Form 10-Q (OMB Control No. 3235-0070);
• Form 10 (OMB Control No. 3235-0064);
• Form S-1 (OMB Control No. 3235-0065);
• Form S-3 (OMB Control No. 3235-0073);
• Form S-4 (OMB Control No. 3235-0324);
• Form S-11 (OMB Control No. 3235-0067);
• Regulation 14A and Schedule 14A (OMB Control No. 3235-0059);
• Regulation 14C and Schedule 14C (OMB Control No. 3235-0057); and
• Form 20-F (OMB Control No. 3235-0288).

The forms and schedules listed above were adopted under the Securities Act or Exchange Act, and set forth the disclosure requirements for securities registration statements, annual and quarterly reports, and current reports, and set forth the requirements for proxy statements and information statements provided in connection with shareholder meetings and corporate actions. Responses to these collections of information are mandatory. Responses to these information collections are not kept confidential, and there is no mandatory retention period for the information disclosed.

A description of the proposed amendments, including the need for the information and its use, as well as a description of the likely respondents, can be found in section II above, and a discussion of the economic effects of the proposed amendments can be found in section IV above.

B. Estimated Paperwork Burden Effects of the Proposed Amendments

The following PRA Table 1 summarizes the estimated effects of the proposed amendments on the paperwork burdens associated with the affected forms.

( printed page 30159)

( printed page 30160)

C. Incremental and Aggregate Burden and Cost Estimates

We estimate below the incremental increase and decreases and aggregate decrease in paperwork burden as a result of the proposed amendments. These estimates represent the average burden for all respondents, both large and small. In deriving our estimates, we recognize that the burdens will likely vary among individual respondents based on a number of factors in addition to the respondent's filer status, including the size and complexity of their business. These estimates include the time and the cost of preparing and reviewing disclosure, filing documents, and retaining records. We believe that some registrants will experience costs in excess of this average and some registrants will experience less than the average costs. Our methodologies for deriving these estimates are discussed below.

For purposes of the PRA, the burden is generally allocated between burden hours, which reflect the portion of the burden that is performed by a registrant internally, and costs, which typically reflect the cost of outside professionals retained by the registrant in connection with the information collection. The collection of information burden change reflected in this PRA analysis are the result of: (1) the reduction in burden from more registrants becoming eligible for disclosure scaling; and (2) the reduction in burden from more registrants no longer being covered by the ICFR auditor attestation requirement.

We note that a number of collections of information are also being amended to reflect changes to the check boxes that relate to a registrant's filer status or status as an asset-backed issuer; ^[464] however, we believe the incremental burden increase associated with the added check boxes would be offset by the incremental burden decrease associated with the removed check boxes; accordingly, we are not requesting a change in our PRA inventory associated with those proposed amendments.

With respect to disclosure scaling, we considered the reduction in compliance hours and cost burden estimated for companies newly eligible for the scaling and accommodations from SRC status in connection with the PRA analysis in the 2018 SRC Adopting Release and adjusted such costs for inflation.^[465] We then adjusted this number to account for additional changes to the rules and forms adopted since 2018, to the extent such changes affected SRCs and/or EGCs differently than other registrants.^[466]

With respect to the proposed amendments to Item 1B of Form 10-K and Item 4A of Form 20-F relating to disclosure of material unresolved staff comments we assume that the burden associated with Item 1B is incurred internally by the issuer. Since the requirements for disclosure of material unresolved staff comments currently only apply to LAFs and AFs, any current NAFs would, under the proposal, be newly subject to this disclosure requirement. As discussed in sections I and IV, we estimate that currently 51.9% of registrants are NAFs, or slightly more than half. Accordingly, we believe it is an appropriate assumption that the average number of affected filings per year ( i.e., the number of current NAFs newly subject to the requirements that will have disclosure to provide) would be consistent with the average number of responses per year that include the disclosure for LAFs and AFs. The average number of filings that include this disclosure for the three year period we observed is 11 for Form 10-K and three for Form 20-F.^[467] However, recognizing that the number of annual responses that may include this disclosure could fluctuate significantly, we estimate up to 20 additional filings per year would be affected for each of Form 10-K and Form 20-F.^[468] We also estimate that complying with Item 1B or Item 4A requires three burden hours annually for each issuer potentially subject to the requirement.

With respect to the ICFR auditor attestation requirement, we considered the Commission's estimate in 2020 that companies no longer subject to the ICFR auditor attestation requirement would see an average per response burden reduction for Form 10-K of 375 hours and $135,000 in costs.^[469] We believe these estimates reflect current practices and so we have applied them to the further reduction in the number of issuers that will be required to provide ICFR auditor attestation, and adjusted the cost burden estimate to account for inflation,^[470] resulting in updated professional costs of $202,500.

The following PRA Table 2 summarizes the estimated per response burden change set out in PRA Table 1 that is attributable to the proposed rules for each affected collection of information based on the above methodologies.

( printed page 30161)

The following PRA Table 3 summarizes the requested paperwork burden changes to existing information collections, including the estimated total reporting burdens and costs, under the proposed amendments.

( printed page 30162)

( printed page 30163)

D. Request for Comment

Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order to:

• Evaluate whether the proposed changes to the collections of information are necessary for the proper performance of the functions of the Commission, including whether the information will have practical utility;
• Evaluate the accuracy of our estimates of the additional burden hours that would result from adoption of the proposed amendments;
• Determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected;
• Evaluate whether there are ways to minimize the burden of the collections of information on those who respond, including through the use of automated collection techniques or other forms of information technology; and
• Evaluate whether the proposed amendments would have any effects on any other collection of information not previously identified in this section.

Any member of the public may direct to us any comments concerning the accuracy of these burden estimates and any suggestions for reducing these burdens. Persons submitting comments on the collection of information requirements should direct them to the OMB Desk Officer for the U.S. Securities and Exchange Commission, MBX.OMB.OIRA.SEC_desk_officer@omp.eop.gov, and should send a copy to Vanessa A. Countryman, Secretary, U.S. Securities and Exchange Commission, using any of the methods in the ADDRESSES section, with reference to File No. S7-2026-18. Requests for materials submitted to OMB by the Commission with regard to the collection of information should be in writing, refer to File No. S7-2026-18 and be submitted to the U.S. Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549-2736. OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication of this release. Consequently, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication.

VI. Congressional Review Act

For purposes of Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (also known as the Congressional Review Act),^[471] the Commission must seek OMB's determination as to whether a final regulation constitutes a “major rule.” Under the Congressional Review Act, a rule is considered “major” where, if adopted, it results in or is likely to result in:

• An annual effect on the U.S. economy of $100 million or more;
• A major increase in costs or prices for consumers or individual industries; or
• Significant adverse effects on competition, investment, or innovation.^[472]

To help inform OMB's determination as to whether any final rule that results from our proposal would be a “major rule,” we solicit comment and data on:

• The potential effect on the U.S. economy on an annual basis;
• Any potential increase in costs or prices for consumers or individual industries; and
• Any potential adverse effect on competition, investment, or innovation.

Commenters are requested to provide empirical data and other factual support for their views to the extent possible.

VII. Initial Regulatory Flexibility Act Analysis

As noted above, when an agency issues a rulemaking proposal, the RFA ^[473] requires the agency to prepare and make available for public comment an IRFA that describes the impact of the proposed rule on small entities.^[474] This IRFA relates to the proposed amendments to rules and forms described in section II above.

A. Reasons for, and Objectives of, the Proposed Action

The proposed amendments would streamline the filer status framework for Exchange Act reporting companies and extend certain accommodations and scaled disclosures to the majority of filers, with the smallest filers additionally being granted longer deadlines for their periodic reports. The proposed amendments are discussed in more detail in section II above. We discuss the economic impact and potential alternatives to the amendments in section IV, the estimated compliance costs and burdens of the amendments under the PRA in section V, and the present values and annualized values of monetized benefits and costs in section VI, above.

B. Legal Basis

The amendments contained in this release are proposed under the authority set forth in sections 6, 7, 10, 19(a), and 28 of the Securities Act, as amended, and sections 3(b), 12, 13, 14(a), 15(d), 23(a), and 36 of the Exchange Act, as amended.

C. Small Entities Subject to the Proposed Amendments

The proposed amendments to the filer status framework, including to the filer status categories and their associated disclosure requirements, would apply to registrants that are small entities, either as issuers or as investment companies. The RFA defines “small entity” to mean “small business,” “small organization,” or “small governmental jurisdiction.” ^[475] For purposes of the Regulatory Flexibility Act, currently under our rules, an issuer, other than an investment company, is a “small business” or “small organization” if it had total assets of $5 million or less on the last day of its most recent fiscal year and is engaged or proposing to engage in an offering of securities that does not exceed $5 million.^[476] An investment company, including a BDC or face-amount certificate company that is a registrant under the Securities Act or the Exchange Act, is considered to be a small entity if it, together with other investment companies in the same group of related investment companies, has net assets of $50 million or less as of the end of its most recent fiscal year.^[477] We estimate that, based on calendar year 2024 data, there were 702 issuers, seven BDCs, and one face-amount certificate company that may be considered small entities under the current rules definitions that would be subject to the proposed amendments.^[478]

D. Projected Reporting, Recordkeeping, and Other Compliance Requirements

The proposed amendments would categorize Exchange Act reporting ( printed page 30164) companies into LAFs and NAFs based on public float.^[479] We expect that all small entities would be NAFs under the proposed rules. NAFs would receive disclosure scaling and other accommodations. In addition, the proposed amendments would create a subcategory of NAFs called SNFs, based on a $35 million asset threshold. All small entities that are currently NAFs would also qualify as SNFs.

Under the proposed rules, SNFs would have extended deadlines for filing their periodic reports. As noted in section IV above, we have found that the smallest registrants, including small entities, face more difficulty in meeting the existing periodic reporting deadlines than do other registrants. We have therefore targeted the proposed reporting deadlines extensions at the smallest registrants, including small entities. We request comment on how the proposed amendments would affect small entities.

E. Duplicative, Overlapping, or Conflicting Federal Rules

We do not expect the proposed rules, if adopted, to duplicate, overlap, or conflict with other rules.

F. Significant Alternatives

The RFA directs us to consider alternatives that would accomplish our stated objectives, while minimizing any significant adverse impact on small entities. In connection with the proposed amendments, we considered the following alternatives:

• Establishing different compliance or reporting requirements or timetables that take into account the resources available to small entities;
• Clarifying, consolidating, or simplifying compliance and reporting requirements under the rules for small entities;
• Using performance rather than design standards; and
• Exempting small entities from all or part of the requirements.

As noted, we expect that all or nearly all small entities would be NAFs under the proposed rules. Because the proposal is expected to reduce compliance burdens, with enhanced scaled disclosure and reporting accommodations being provided to the smallest registrants, small entities should largely experience only benefits from the proposed rules. Therefore, we do not anticipate that small entities would experience any significant adverse impact from the proposal.

With regard to different compliance or reporting requirements or timetables that take into account the resources available to small entities and clarifying, consolidating, or simplifying compliance and reporting requirements under the rules for small entities, the proposal would create a sub-category of the smallest NAFs, or SNFs, comprising NAFs reporting total assets of $35 million or less as of the end of an issuer's two most recent second fiscal quarters, that would have extended deadlines for filing their Form 10-K and Form 10-Q periodic reports. Additionally, we considered providing the smallest registrants with alternative accommodations centered on reducing their accounting costs, such as requiring fewer years of audited financial statements. However, given the importance of audited financial statements to investor decision-making, we did not propose that change, and instead proposed the extended reporting deadline accommodation.

Because the proposed amendments extend almost all existing scaling and accommodations to registrants that would not be LAFs under the proposal, and given that the Commission has issued a separate proposal to allow reporting companies to report on a semiannual basis,^[480] we do not believe there are additional accommodations or exemptions that should be applied to small entities before reporting companies transition to the proposed filer status framework. Additionally, although we are proposing to eliminate the SRC filer status, this will not negatively affect small entities since, under the proposed amendments, all the same disclosure and other accommodations would be made available to small entities under NAF filer status, and additional periodic report filing deadline accommodations would be made available to small entities under the SNF status. To the extent that a small entity is currently an SRC but not an EGC, it would also benefit from the additional EGC accommodations being extended to NAFs.

We have used design standards rather than performance standards in connection with the proposed amendments to promote clarity and comparability. With regard to exempting small entities from all or part of the requirements, exempting small entities from the amendments we are proposing would not be appropriate as the amendments provide scaled disclosure and other reporting accommodations to small entities.

Request for Comment

We encourage the submission of comments with respect to any aspect of this IRFA. In particular, we request comments regarding:

• The number of small entities that may be affected by the proposed amendments;
• The existence or nature of the potential impact of the proposed amendments on small entities discussed in the analysis;
• Whether and to what extent the creation of the proposed SNF status and accompanying accommodations would benefit small entities, and whether additional accommodations should be made available to SNFs;
• Whether there are modifications to the proposed amendments that could further lower the burden on small entities; and
• How to quantify the impact of the proposed amendments.

Commenters are asked to describe the nature of any impact and provide empirical data supporting the extent of the impact. Comments will be considered in the preparation of the Final Regulatory Flexibility Analysis, if the proposed amendments are adopted, and will be placed in the same public file as comments on the proposed amendments themselves.

Statutory Authority

The rule amendments contained in this release are being proposed under the authority set forth in sections 6, 7, 10, 19(a), and 28 of the Securities Act, as amended, and sections 3(b), 12, 13, 14(a), 14A, 15(d), 23(a), and 36 of the Exchange Act, as amended.

Text of Proposed Amendments

For the reasons set forth in the preamble, the Commission proposes to amend Title 17, Chapter II of the Code of Federal Regulations as follows:

1. The authority citation for part 210 continues to read as follows:

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 77nn(25), 77nn(26), 78c, 78j-1, 78 l, 78m, 78n, 78o(d), ( printed page 30165) 78q, 78u-5, 78w, 78 ll, 78mm, 80a-8, 80a-20, 80a-29, 80a-30, 80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, and sec. 102(c), Pub. L. 112-106, 126 Stat. 310 (2012), unless otherwise noted.

2. Revise § 210.2-02(f)(1) to read as follows:

3. Amend § 210.3-01 by revising paragraphs (e) and (i) to read as follows:

4. Revise § 210.3-02(a) to read as follows:

5. Revise § 210.3-09(b) to read as follows:

6. Revise § 210.3-12(g) to read as follows:

7. Amend § 210.3-15 by removing paragraphs (a), (b), and (c), and reserving § 210.3-15.

8. Revise and republish § 210.3-19 to read as follows:

9. Amend § 210.4-08 by removing and reserving paragraphs (b), (d), (h), (m), and (n).

10. Amend § 210.5-02 by:

a. In paragraph 19, removing paragraph (b) and removing the paragraph (a) designation;

b. In paragraph 20, removing the words “indicating the current portion of deferred income taxes,”;

c. In paragraph 22, removing paragraph (b) and removing the paragraph (a) designation; and

d. In paragraph 27(c), removing the words “(See also § 210.4-08(d).)”.

11. Revise and republish § 210.8-01 through 210.8-08 and the undesignated center heading “Article 8 Financial Statements of Smaller Reporting Companies” to read as follows:

Article 8 Financial Statements of Non-Accelerated Filers

12. Amend § 210.10-01 by:

a. Removing and reserving paragraph (b)(2).

b. Removing and reserving paragraph (b)(7).

13. Amend § 210.15-01 by removing the words “smaller reporting company based on its annual revenues as of the most recently completed fiscal year for which audited financial statements are available,” and adding, in their place, the words “non-accelerated filer” in the following places:

a. Paragraph (b);

b. Paragraph (c); and

c. Paragraph (d).

14. The authority citation for part 229 continues to read as follows:

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78 l, 78m, 78n, 78n-1, 78o, 78u-5, 78w, 78 ll, 78 mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37, 80a-38(a), 80a-39, 80b-11 and 7201 et seq.;18 U.S.C. 1350; sec. 953(b), Pub. L. 111-203, 124 Stat. 1904 (2010); and sec. 102(c), Pub. L. 112-106, 126 Stat. 310 (2012).

15. Amend § 229.10 to:

a. Add (b)(3); and

b. Revise (f).

The addition and revision to read as follows:

16. Revise and republish § 229.101 to read as follows:

17. Amend § 229.201 by

a. Revising paragraph (a)(1)(iii);

b. Revising paragraph (e)(1); and

c. Removing and reserving Instruction 6 to paragraph (e).

18. Revise and republish § 229.302 to read as follows:

19. Amend § 229.303 by:

a. Revising “ Instruction to paragraph (b): 1.”; and

b. Revising paragraph (c).

The revisions to read as follows:

20. Amend § 229.305 by:

a. Revising paragraph (a) introductory text;

b. Revising paragraph (a)(1) introductory text;

c. Revising paragraph (a)(2);

d. Revising paragraph (a)(3);

e. Revising paragraph (a)(4);

f. Revising paragraph (b) introductory text;

g. Revising paragraph (b)(2); and

h. Removing and reserving paragraph (e).

The revisions to read as follows:

21. Amend § 229.308 by:

a. Revising paragraph (a)(4);

b. Revising paragraph (b); and

c. Revising Instruction to Item 308.

22. Amend § 229.402 by:

a. Adding paragraph (a)(7);

b. Removing and reserving paragraph ( l);

c. Revising paragraph (t)(1);

d. Revising the Instructions to Item 402(t);

e. Removing and reserving Instruction 7.3 to Item 402(u) and Instruction 8 to Item 402(u);

f. Revising the introductory text to paragraph (v) and paragraph (v)(2);

g. Removing and reserving paragraph (v)(8); and

h. Revising Instruction to paragraph (x)(2).

The revisions to read as follows:

23. In addition to the amendments set forth above, in 17 CFR 229.402, remove the words “smaller reporting company” and add, in their place, the words “non-accelerated filer” in the following places:

a. Paragraph (m)(1), (m)(2)(i), (m)(2)(ii), (m)(2)(iii), Instruction 2 to Item 402(m)(2), Instruction 2 to Item 402(m)(2), 402(m)(3), 402(m)(5)(i), 402(m)(5)(ii), 402(m)(5)(iii), and 402(m)(5)(v);

b. Paragraph (n)(1), Instruction 1 to Item 402(n)(2)(v) and (n)(2)(vi), Instruction 2 to Item 402(n)(2)(v) and (n)(2)(vi),Instruction to Item 402(n)(2)(viii), (n)(2)(ix), (n)(2)(ix)(C), (n)(2)(ix)(D)(1), (n)(2)(ix)(D)(2), (n)(2)(ix)(E), (n)(2)(ix)(F), Instruction 4 to Item 402(n)(2)(ix), and Instruction1 to Item 402(n);

c. Paragraph (p)(1) and Instruction 3 to Item 402(p)(2);

d. Paragraph (q)(2); and

e. Paragraph (r)(1), (r)(2)(vii), (r)(2)(vii)(C), (r)(2)(vii)(D), (r)(2)(vii)(E), (r)(2)(vii)(F), (r)(2)(vii)(H), Instruction to Item 402(r)(2)(vii).

24. In addition to the amendments set forth above, in 17 CFR 229.402, remove the words “smaller reporting companies” and add, in their place, the words “non-accelerated filers” in the following places:

a. The heading to paragraph (m), and (m)(5);

b. The heading to paragraph (n), and instruction 2 to Instructions to Item 402(n)(2)(iii) and (iv);

c. The heading to paragraph (o);

d. The heading to paragraph (p), and instruction 3 to Instructions to Item 402(p)(2);

e. The heading to paragraph (q); and

f. The heading to paragraph (r) and Instruction to Item 402(r)(2)(vii).

25. Revise and republish § 229.404 to read as follows:

26. Amend § 229.407 by:

a. Revising paragraph (d)(5)(i);

b. Revising paragraphs (e)(4) and (e)(5); and

c. Removing and Reserving paragraph (g).

The revisions to read as follows:

27. Revise Instruction 6 of the Instructions to Item 504 in § 229.504 to read as follows:

28. Amend 17 CFR 229.914 by, in paragraph (c)(2), removing the words “, earnings per share amounts, and ratio of earnings to fixed charges” and adding, in their place, “and earnings per share amounts”.

29. Revise Instruction 1 of the Instructions to Item 1011(b) in § 229.1011 to read as follows:

30. The authority citation for part 230 continues to read in part as follows:

Authority: 15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78 l, 78m, 78n, 78o, 78o-7 note, 78t, 78w, 78 ll (d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126 Stat. 313 (2012), unless otherwise noted.

31. Amend § 230.157 by:

a. In paragraph (a), removing the words “were $5 million or less and that is engaged or proposing to engage in small business financing” and adding, in their place, “were $35 million or less”;

b. In paragraph (a), removing the second sentence.

32. Amend § 230.405 by:

a. Removing the definition of smaller reporting company; and

b. Adding the definition of Large accelerated filer, non-accelerated filer, and small non-accelerated filer.

The addition to read as follows:

33. The authority citation for part 232 continues to read in part as follows:

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 77sss(a), 78c(b), 78 l, 78m, 78n, 78n-1, 78o(d), 78w(a), 78 ll, 80a-6(c), 80a-8, 80a-29, 80a-30, 80a-37, 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted.

34. Remove § 232.405(f).

35. The authority citation for part 239 continues to read in part as follows:

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 77sss, 78c, 78 l, 78m, 78n, ( printed page 30177) 78 o (d), 78 o -7 note, 78u-5, 78w(a), 78 ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26, 80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106, 126 Stat. 312, unless otherwise noted.

36. Amend Form S-1 (referenced in § 239.11) by:

a. On the cover, removing the words “Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company” and adding, in their place, the words “Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small non-accelerated filer, or an emerging growth company.”

b. On the cover, removing the words “See the definitions of `large accelerated filer,' `accelerated filer,' `smaller reporting company' and `emerging growth company' in Rule 12b-2 of the Exchange Act,” and adding, in their place, the words “See the definitions of `large accelerated filer,' `non-accelerated filer,' `small non-accelerated filer,' and `emerging growth company' in Rule 12b-2 of the Exchange Act.”

c. On the cover, removing the check box with the words “Accelerated filer” and adding, in its place, a check box with the words “Small non-accelerated filer”.

d. On the cover, removing the check box with the words “Smaller reporting company”.

e. On the cover, removing the words “If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act.” and adding, in their place, the words “If a non-accelerated filer that is no more than five years after its initial registration, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards.”

f. In Item 11, paragraph (e), removing the words “smaller reporting company” and adding, in their place, “non-accelerated filer”.

g. In Item 12, paragraph (b), removing the words “smaller reporting company, as defined in Rule 405 ( 17 CFR 230.405)” and adding, in their place, “non-accelerated filer, as defined in 17 CFR 240.12b-2 of this chapter”.

h. In Item 12, paragraph (b), removing the words “smaller reporting company making this election” and adding, in their place, “non-accelerated filer making this election”.

Note:

The text of Form S-1 does not, and these amendments will not, appear in the Code of Federal Regulations.

37. Amend Form S-3 (referenced in § 239.13) by:

a. On the cover, removing the words “Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company” and adding, in their place, the words “Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small non-accelerated filer, or an emerging growth company.”

b. On the cover, removing the words “See the definitions of `large accelerated filer,' `accelerated filer,' `smaller reporting company' and `emerging growth company' in Rule 12b-2 of the Exchange Act.” and adding, in their place, the words “See the definitions of `large accelerated filer,' `non-accelerated filer,' `small non-accelerated filer,' and `emerging growth company' in Rule 12b-2 of the Exchange Act.”

c. On the cover, removing the check box with the words “Accelerated filer” and adding, in its place, a check box with the words “Small non-accelerated filer”.

d. On the cover, removing the check box with the words “Smaller reporting company”.

e. On the cover, removing the words “If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act.” and adding, in their place, the words “If a non-accelerated filer that is no more than five years after its initial registration, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards.”

f. In General Instruction II.C., removing the words “A smaller reporting company, defined in Rule 405 ( 17 CFR 230.405), that is eligible to use Form S-3 shall use the disclosure items in Regulation S-K (17 CFR 229.10 et seq.) with specific attention to the scaled disclosure provided for smaller reporting companies, if any. Smaller reporting companies may provide the financial information called for by Article 8 of Regulation S-X in lieu of the financial information called for by Item 11 in this Form.” and adding, in their place, “For a non-accelerated filer, defined in Rule 405 (17 CFR 230.405), that is eligible to use Form S-3 use the disclosure items in Regulation S-K (17 CFR 229.10 et seq.) with specific attention to the scaled disclosure provided for non-accelerated filers, if any. Non-accelerated filers may provide the financial information called for by Article 8 of Regulation S-X in lieu of the financial information called for by Item 11 in this Form.

Note:

The text of Form S-3 does not, and these amendments will not, appear in the Code of Federal Regulations.

38. Amend Form S-4 (referenced in § 239.25) by:

a. On the cover, removing the words “Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.” and adding, in their place, “Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small non-accelerated filer, or an emerging growth company.”

b. On the cover, removing the words “See the definitions of `large accelerated filer,' `accelerated filer,' `smaller reporting company,' and `emerging growth company' in Rule 12b-2 of the Exchange Act.” and adding, in their place, “See the definitions of `large accelerated filer,' `non-accelerated filer,' `small non-accelerated filer,' and `emerging growth company' in Rule 12b-2 of the Exchange Act.”

c. On the cover, removing the check box with the words “Accelerated filer” and adding, in its place, a check box with the words “Small non-accelerated filer”.

d. On the cover, removing the check box with the words “Smaller reporting company”.

e. On the cover, removing the words “If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for company with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act.” and adding, in their place, “If a non-accelerated filer that is no more than five years after its initial registration, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards.”

f. In General Instruction I, paragraph 1, removing the words “A smaller reporting company” and adding, in their place, “A non-accelerated filer”.

g. In Part I, Item 5, removing the words “A smaller reporting company” and adding, in their place, “A non-accelerated filer”.

h. In Part I, Item 12, paragraph (a)(3), removing the words “Smaller reporting ( printed page 30178) companies” and adding, in their place, “Non-accelerated filers”.

Note:

The text of Form S-4 does not, and these amendments will not, appear in the Code of Federal Regulations.

39. Amend Form S-8 (referenced in § 239.16b) by:

a. On the cover, removing the words “Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company” and adding, in their place, the words “Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small non-accelerated filer, or an emerging growth company.”

b. On the cover, removing the words “See the definitions of `large accelerated filer,' `accelerated filer,' `smaller reporting company' and `emerging growth company' in Rule 12b-2 of the Exchange Act.” and adding, in their place, the words “See the definitions of `large accelerated filer,' `non-accelerated filer,' `small non-accelerated filer,' and `emerging growth company' in Rule 12b-2 of the Exchange Act.”

c. On the cover, removing the check box with the words “Accelerated filer” and adding, in its place, a check box with the words “Small non-accelerated filer”.

d. On the cover, removing the check box with the words “Smaller reporting company”.

e. On the cover, removing the words “If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act.” and adding, in their place, the words “If a non-accelerated filer that is no more than five years after its initial registration, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards.”

f. In General Instructions B.3., removing the words “A 'small reporting company,' defined in § 230.405, shall refer to the disclosure items in Regulation S-K ( 17 CFR 229.10 et seq.) with specific attention to the scaled disclosure provided for smaller reporting companies, if any.” and adding, in their place, “For a 'non-accelerated filer,' defined in § 230.405, refer to the disclosure items in Regulation S-K (17 CFR 229.10 et seq.) with specific attention to the scaled disclosure provided for non-accelerated filers, if any.”

Note:

The text of Form S-8 does not, and these amendments will not, appear in the Code of Federal Regulations.

40. Amend Form S-11 (referenced in § 239.18) by:

a. On the cover, removing the words “Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company” and adding, in their place, the words “Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small non-accelerated filer, or an emerging growth company.”

b. On the cover, removing the words “See the definitions of `large accelerated filer,' `accelerated filer,' `smaller reporting company' and `emerging growth company' in Rule 12b-2 of the Exchange Act.” and adding, in their place, the words “See the definitions of `large accelerated filer,' `non-accelerated filer,' `small non-accelerated filer,' and `emerging growth company' in Rule 12b-2 of the Exchange Act.”

c. On the cover, removing the check box with the words “Accelerated filer” and adding, in its place, a check box with the words “Small non-accelerated filer”.

d. On the cover, removing the check box with the words “Smaller reporting company”.

e. On the cover, removing the words “If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act.” and adding, in their place, the words “If a non-accelerated filer that is no more than five years after its initial registration, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards.”

f. In Part I., Item 27, removing the words “A small reporting company” and adding, in their place, “A non-accelerated filer”.

Note:

The text of Form S-11 does not, and these amendments will not, appear in the Code of Federal Regulations.

41. Amend Form 1-A (referenced in § 239.90) in Part II(a)(1)(ii) by removing the words “smaller reporting companies” and adding, in their place, “non-accelerated filers”.

Note:

The text of Form 1-A does not, and these amendments will not, appear in the Code of Federal Regulations.

42. The authority citation for part 240 continues to read in part as follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 78g, 78i, 78j, 78j-1, 78j-4, 78k, 78k-1, 78 l, 78m, 78n, 78n-1, 78o, 78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78 ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 1681w(a)(1), 6801-6809, 6825, 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.

43. Amend § 240.0-10 by, in paragraph (a), removing the words “$5 million or less” and adding, in their place, “$35 million or less”.

44. Remove § 240.10A-3(a)(5).

45. Revise § 240.10C-1(b)(5)(i) and (ii) to read as follows:

46. Amend § 240.12b-2 by:

a. Revising the introductory text;

b. Removing the definition Accelerated filer and large accelerated filer;

c. Removing the definition Smaller reporting company; and

d. Adding the definition Large accelerated filer, non-accelerated filer, and small non-accelerated filer.

The revision and addition to read as follows:

47. Revise § 240.13a-10(j) to read as follows:

48. Revise § 240.13a-13(a) to read as follows:

49. Revise § 240.13q-1(d)(3) to read as follows:

50. Revise § 240.14a-3(b)(1) to read as follows:

51. Remove and reserve § 240.14a-20.

52. Revise and republish § 240.14a-21 to read as follows:

53. Revise § 240.15d-2(a) to read as follows:

54. Revise § 240.15d-10(j) to read as follows:

55. Revise § 240.15d-13 to read as follows:

56. The authority citation for part 249 continues to read in part as follows:

Authority: 15 U.S.C. 78a et seq. and 7201 et seq.;12 U.S.C. 5461 et seq.;18 U.S.C. 1350; sec. 953(b) Pub. L. 111-203, 124 Stat. 1904; sec. 102(a)(3) Pub. L. 112-106, 126 Stat. 309 (2012), sec. 107 Pub. L. 112-106, 126 Stat. 313 (2012), sec. 72001 Pub. L. 114-94, 129 Stat. 1312 (2015), and secs. 2 and 3 Pub. L. 116-222, 134 Stat. 1063 (2020), unless otherwise noted.

57. Amend Form 10 (referenced in § 249.210) by:

a. On the cover, removing the words “Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of `large accelerated filer,' `accelerated filer,' `smaller reporting company,' and `emerging growth company' in Rule 12b-2 of the Exchange Act.” and adding, in their place, “Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small non-accelerated filer, an asset-backed issuer, or an emerging growth company. See the definitions of `large accelerated filer,' `non-accelerated filer,' `small non-accelerated filer,' and `emerging growth company' in Rule 12b-2 of the Exchange Act, and `asset-backed issuer' in Item 1101(b) of Regulation AB.”

b. On the cover, removing the check box labeled “Accelerated filer” and adding, in its place, a check box labeled “Small non-accelerated filer”.

c. On the cover, removing the check box labeled “Smaller reporting company” and adding, in its place, a check box labeled “Asset-backed issuer”.

d. On the cover, removing the words “If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.” and adding, in their place, the words “If a non-accelerated filer that is no more than five years after its initial registration, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards.”

e. In Item 1A., removing the words “Smaller reporting company” and adding, in their place, “Non-accelerated filer”.

f. In Item 13., removing the words “Smaller reporting companies” and adding, in their place, “Non-accelerated filers”.

g. In the Signatures section, removing the words “Print the name and title of the signing officer under his signature” and adding, in their place, “Print the name and title of the signing officer under his or her signature”.

Note:

The text of Form 10 does not, and these amendments will not, appear in the Code of Federal Regulations.

58. Amend Form 20-F (referenced in § 249.220f) by:

a. On the cover, removing the words “Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of `large accelerated filer,' `accelerated filer,' `smaller reporting company' and `emerging growth company' in Rule 12b-2 of the Exchange Act.” and adding, in their place, “Indicate by check mark whether the registrant is an emerging growth company. See the definition of `emerging growth company' in Rule 12b-2 of the Exchange Act.”

b. On the cover, removing the check boxes for “Large accelerated filer”, “accelerated filer”, and “Non-accelerated filer”.

c. In General Instruction B, paragraph (f), removing the words “A foreign private issuer that is a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act ( 17 CFR 240.12b-2), may not use the scaled disclosure requirements in Regulation S-X and Regulation S-K available to smaller reporting companies for the purposes of preparing this Form” and adding, in their place ”A foreign private issuer may not use the scaled disclosure requirements in Regulation S-X and Regulation S-K available to non-accelerated filers, as defined in Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2), for the purposes of preparing this Form”

d. In Part I, revising Item 4A. ( printed page 30182)

e. In Part I, Item 11, revising paragraph (e).

f. In Part II, Item 15, revising paragraph (b)(4).

g. In Part II, Item 15, revising paragraph (c).

Note:

Form 20-F is attached as Appendix A to this document. Form 20-F will not appear in the Code of Federal Regulations.

59. Amend Form 8-K (referenced in § 249.308) by:

a. On the cover, removing the words “If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act” and adding, in their place, the words “If a non-accelerated filer that is no more than five years after its initial registration, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards”.

b. In Item 3.02(b), removing the words “smaller reporting company” and adding, in their place, “non-accelerated filer (as defined in 17 CFR 240.12b-2)”.

c. In the Instructions to Item 3.02, removing Instruction 2.

d. In Item 9.01(a), removing the words “smaller reporting companies” and adding, in their place, “non-accelerated filers”.

e. In Item 9.01(b), removing the words “smaller reporting companies” and adding, in their place, “non-accelerated filers”.

Note:

The text of Form 8-K does not, and these amendments will not, appear in the Code of Federal Regulations.

60. Revise § 249.308a to read as follows:

61. Amend Form 10-Q (referenced in § 249.308a) by:

a. Revising General Instruction A.

b. On the cover, removing the words “Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of `large accelerated filer,' `accelerated filer,' `smaller reporting company,' and `emerging growth company' in Rule 12b-2 of the Exchange Act” and adding, in their place, “Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small non-accelerated filer, or an emerging growth company. See the definitions of `large accelerated filer,' `non-accelerated filer,' `small non-accelerated filer,' and `emerging growth company' in Rule 12b-2 of the Exchange Act”.

c. On the cover, removing the check box labeled “Accelerated filer” and adding, in its place, a check box labeled “Small non-accelerated filer”.

d. On the cover, removing the check box labeled “Smaller reporting company”.

e. On the cover, removing the words “If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.” and adding, in their place, the words “If a non-accelerated filer that is no more than five years after its initial registration, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards.”

f. In Part I, Item 1, removing the words “smaller reporting company” and adding, in their place, “non-accelerated filer”.

g. In Part II, revising Item 1A.

h. In the Signatures section, removing the words “Print the name and title of the signing officer under his signature” and adding, in their place, “Print the name and title of the signing officer under his or her signature”.

Note:

Form 10-Q is attached as Appendix B to this document. Form 10-Q will not appear in the Code of Federal Regulations.

62. Revise § 249.310(a) and (b) to read as follows:

63. Amend Form 10-K (referenced in § 249.310) by:

a. Revising General Instruction A.

b. On the cover, removing the words “Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of `large accelerated filer,' `accelerated filer,' `smaller reporting company' and `emerging growth company' in Rule 12b-2 of the Exchange Act.” and adding, in their place, “Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small non-accelerated filer, an asset-backed issuer, or an emerging growth company. See the definitions of `large accelerated filer,' `non-accelerated filer,' `small non-accelerated filer,' and `emerging growth company' in Rule 12b-2 of the Exchange Act, and `asset-backed issuer' in Item 1101(b) of Regulation AB.”

c. On the cover, removing the check box labeled “Accelerated filer” and adding, in its place, a check box labeled “Small non-accelerated filer”.

d. On the cover, removing the check box labeled “Smaller reporting ( printed page 30183) company” and adding, in its place, a check box labeled “Asset-backed issuer”.

e. On the cover, removing the words “If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.” and adding, in their place, the words “If a non-accelerated filer that is no more than five years after its initial registration, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards.”

f. In Part I, revising Item 1A.

g. In Part I, revising Item 1B.

h. In the Signatures section, removing the words “Print the name and title of each signing officer under his signature” and adding, in their place, “Print the name and title of each signing officer under his or her signature”.

Note:

Form 10-K is attached as Appendix C to this document. Form 10-K will not appear in the Code of Federal Regulations.

Note:

The following appendices will not appear in the Code of Federal Regulations.

Appendix A—Form 20-F

Form 20-F

Indicate by check mark whether the registrant is an emerging growth company. See the definition “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐

If an emerging growth company is no more than five years after its initial registration and prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected to use the extended transition period for complying with certain new or revised financial accounting standards. ☐

General Instructions

B. General Rules and Regulations That Apply to This Form

(f) A foreign private issuer may not use the scaled disclosure requirements in Regulation S-X and Regulation S-K available to non-accelerated filers, as defined in Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2), for the purposes of preparing this Form.

Part I

Item 4A. Unresolved Staff Comments

In an annual report, if the registrant has received written comments from the Commission staff regarding its periodic reports under the Exchange Act not less than 180 days before the end of its fiscal year to which the annual report relates, and such comments remain unresolved, disclose the substance of any such unresolved comments that the registrant believes are material. Such disclosure may provide other information including the position of the registrant with respect to any such comment.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

(e) Exemption. Registrants that would otherwise not meet the requirements to be large accelerated filers, as defined in § 230.405 of this chapter and § 240.12b-2 of this chapter, need not provide the information required by this Item 11.

Part II

Item 15. Controls and Procedures

(b) * * *

(4) If an issuer, other than an emerging growth company (as defined in 17 CFR 240.12b-2), had an aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $75 million or more as of the last business day of the issuer's most recently completed second fiscal quarter, or otherwise includes in its annual report a registered public accounting firm's attestation report on internal control over financial reporting, a statement that the registered public accounting firm that audited the financial statements included in the annual report containing the disclosure required by this Item has issued an attestation report on management's assessment of the issuer's internal control over financial reporting.

(c) Attestation report of the registered public accounting firm. If an issuer, other than an emerging growth company (as defined in 17 CFR 240.12b-2), had an aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $75 million or more as of the last business day of the issuer's most recently completed second fiscal quarter, and where the Form is being used as an annual report filed under Section 13(a) or 15(d) of the Exchange Act by an issuer, other than an emerging growth company (as defined in 17 CFR 240.12b-2), provide the registered public accounting firm's attestation report on management's assessment of the issuer's internal control over financial reporting in the issuer's annual report containing the disclosure required by this Item.

Appendix B—Form 10-Q

Form 10-Q

General Instructions

A. Rule as to Use of Form 10-Q

1. Use Form 10-Q for quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m or 78o(d)), filed pursuant to Rule 13a-13 (17 CFR 240.13a-13) or Rule 15d-13 (17 CFR 240.15d-13). File a quarterly report on this Form pursuant to Rule 13a-13 or Rule 15d-13 within the following period after the end of each of the first three fiscal quarters of each fiscal year, but no report need be filed for the fourth quarter of any fiscal year:

a. 40 days after the end of the fiscal quarter for large accelerated filers (as defined in 17 CFR 240.12b-2);

b. 45 days after the end of the fiscal quarter for non-accelerated filers (as defined in 17 CFR 240.12b-2); and

c. 50 days after the end of the fiscal quarter for small non-accelerated filers (as defined in 17 CFR 240.12b-2).

( printed page 30184)

( printed page 30185)

( printed page 30186)

( printed page 30187)

( printed page 30188)

( printed page 30189)

( printed page 30190)

91 FR 30086