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SEC proposes amending certain Exchange Act definitions

Proposal would amend ‘accelerated filer’ and ‘large accelerated filer’ definitions

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SEC proposes to amend 2 accelerated filer definitions The SEC issued a Proposed Rule, Amendments to the Accelerated Filer and Large Accelerated Filer Definitions, which would amend these terms in Exchange Act Rule 12b-2, Definitions, to exclude an issuer that is eligible to be a smaller reporting company (SRC) and had annual revenues less than $100 million in its most recent fiscal year.

The proposal would also revise the transition provisions in Rule 12b-2 for exiting accelerated filer and large accelerated filer status by increasing the transition thresholds and adding a revenue test.

The proposed amendments are intended to reduce compliance costs for certain low-revenue issuers while maintaining investor protections.

Proposed revisions to exclude low-revenue SRCs A company qualifies as an SRC during its initial determination when it meets at least one of two criteria:

  • Its public float is less than $250 million, regardless of revenue levels.
  • Its annual revenues are less than $100 million and it either has no public float or its public float is less than $700 million.

The proposed amendments would add a new condition to the definitions of “accelerated filer” and “large accelerated filer” to exclude from such definitions a subset of SRCs that are eligible to be an SRC based on their revenue.

Only those SRCs that qualify as non-accelerated filers under the proposed amendments would not be subject to the accelerated or large accelerated filing deadlines for periodic reports and would not be required to comply with Sarbanes-Oxley Act Section 404(b), the auditor attestation requirement for an issuer’s internal control over financial reporting (ICFR). The proposal would not affect management’s responsibility to establish and maintain the effectiveness of its ICFR, or to perform its annual assessment of ICFR under Sarbanes-Oxley Act Section 404(a).

Proposed revisions to transition thresholds The proposed amendments would also revise the transition provisions for issuers exiting accelerated filer and large accelerated filer status as follows:

  • Increasing the public float transition threshold from $50 million to $60 million for an accelerated or large accelerated filer to become a non-accelerated filer.
  • Increasing the public float transition threshold from $500 million to $560 million for a large accelerated filer to become an accelerated filer.
  • Transitioning to non-accelerated filer status if the issuer becomes eligible to be an SRC under the SRC revenue test.

Comment due date The comment period ends 60 days after the Proposed Rule is published in the Federal Register.

Contacts:

Kendra DeckerKendra Decker
Partner-in-charge
SEC Regulatory Matters
T +1 202 521 1530


Rohit ElhanceRohit Elhance
Partner
SEC Regulatory Matters
T +1 202 861 4110


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