Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies

Federal RegisterMay 21, 2026

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 210, 229, 230, 232, 239, 240, and 249

[Release Nos. 33-11419; 34-105515; File No. S7-2026-18]

RIN 3235-AN40

Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies

AGENCY:

Securities and Exchange Commission.

ACTION:

Proposed rule.

SUMMARY:

The Securities and Exchange Commission (“Commission”) proposes amendments to streamline filer statuses for Securities Exchange Act of 1934 (“Exchange Act”) reporting companies into two primary categories: large accelerated filers and non-accelerated filers. The Commission further proposes to raise the threshold and seasoning requirements for large accelerated filer status and extend certain existing accommodations and scaled disclosures, including those for smaller reporting companies and emerging growth companies, to all non-accelerated filers, while continuing to require compliance with non-scaled disclosure from large accelerated filers. The Commission also proposes to extend the deadlines to file periodic reports for the smallest non-accelerated filers, as measured by total assets. Finally, the Commission also proposes to update the rules that define which issuers are considered small entities for purposes of the Regulatory Flexibility Act (“RFA”).

DATES:

Comments should be received on or before July 20, 2026.

ADDRESSES:

Comments may be submitted by any of the following methods:

Electronic Comments

○ Use the Commission's internet comment form (

https://www.sec.gov/comments/s7-2026-18/enhancement-emerging-growth-company-accommodations-simplification-filer-status-reporting-companies

); or

○ Send an email to

rule-comment@sec.gov.

Please include File Number S7-2026-18 on the subject line.

Paper Comments

○ Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-2026-18. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method of submission. The Commission will post all comments on the Commission's website (

https://www.sec.gov/comments/s7-2026-18/enhancement-emerging-growth-company-accommodations-simplification-filer-statusreporting-companies

). Do not include personally identifiable information in submissions; you should submit only information that you wish to make available publicly. The Commission may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection.

Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission's website. To ensure direct electronic receipt of such notifications, sign up through the “Stay Connected” option at

www.sec.gov

to receive notifications by email.

A summary of the proposal of not more than 100 words is posted on the Commission's website (

https://www.sec.gov/rules-regulations/2026/05/s7-2026-18

FOR FURTHER INFORMATION CONTACT:

Nabeel Cheema, Special Counsel, and Stephanie Sullivan, Associate Chief Accountant, Division of Corporation Finance, at (202) 551-3430, and Angela Mokodean, Senior Special Counsel, Division of Investment Management, at (202) 551-6792, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

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

BILLING CODE 8011-01-P

EP21MY26.007

EP21MY26.008

BILLING CODE 8011-01-C

Table of Contents

17 CFR 210.1-01 through 210.15-01.

17 CFR 229.10 through 229.1610.

17 CFR 232.10 through 232.501.

15 U.S.C. 77a

et seq.

15 U.S.C. 78a

et seq.

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.

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.

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,

13(a),

and 15(d)

of the Exchange Act, which impose periodic and current reporting requirements on companies:

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)).

These registrants

must file reports prescribed by the Commission, which generally include annual reports on Form 10-K and quarterly reports on Form 10-Q.

With respect to investment companies, business development companies (“BDCs”) and face-amount certificate companies are also subject to these reporting requirements.

See, e.g.,

the preamble of the Securities Act, which sets forth the purpose of the Act: “[t]o provide full and fair disclosure of the character of securities sold in interstate and foreign commerce and through the mails, and to prevent frauds in the sale thereof, and for other purposes.” The antifraud provisions of the Securities Act necessitate application of a materiality standard to disclosure.

See Basic Inc.

Levinson,

485 U.S. 224 (1988). Information is material “if there is a substantial likelihood its disclosure would have been considered significant by a reasonable investor.”

Id.

(citing

TSC Industries, Inc.

Northway, Inc.,

426 U.S. 438 (1976)).

See, e.g.,

Securities Act section 28, 15 U.S.C. 77z-3 (providing general exemptive authority to the extent that such exemption is necessary or appropriate in the public interest); Jumpstart Our Business Startups Act, Public Law 112-106, 126 Stat. 306 (2012) (easing the compliance burden for newly registered companies).

15 U.S.C. 78

15 U.S.C. 78m(a).

15 U.S.C. 78

(d).

In addition, any company that has voluntarily registered a class of equity securities under section 12(g) of the Exchange Act and any company that has succeeded to the obligation of another reporting company (17 CFR 240.12g-3 and 240.15d-5) are subject to the reporting requirements of the Exchange Act.

We use the terms “public companies,” “registrants,” and “issuers” interchangeably in this release. Unless explained in the text, the use of different terms in different places is not meant to connote a substantive difference.

The Exchange Act and related rules impose additional requirements on registrants that are not foreign private issuers (“FPIs”), including obligations to provide current reports (on Form 8-K pursuant to section 13 or 15(d)) and certain proxy information and soliciting materials in connection with a shareholder meeting (on Schedule 14A or 14C pursuant to section 14). The Commission has recently proposed to allow all registrants the option to report semiannually rather than quarterly on Form 10-Q.

See Semiannual Reporting,

Release No. 33-11414 (May 5, 2026) [91 FR 24968 (May 7, 2026)] (“Semiannual Proposing Release”). FPIs, by contrast, already have more limited filing requirements, unless they elect to file on domestic issuer forms.

See Concept Release on Foreign Private Issuer Eligibility,

Release No. 33-11376 (June 4, 2025) [90 FR 24232 (June 9, 2025)]. FPIs are defined in 17 CFR 240.3b-4. While FPIs may file annual reports on Form 20-F or Form 40-F, FPIs are exempt from the proxy rules, and their obligation to file current reports on Form 6-K is largely limited to circumstances in which FPIs have already made a public filing or disclosure in their home country jurisdiction.

BDCs are a type of closed-end investment company that is not registered under the Investment Company Act of 1940 (“Investment Company Act”). Face-amount certificate companies are a type of registered investment company that are engaged or propose to engage in the business of issuing face-amount certificates of the installment type, or that have been engaged in such business and have any such certificate outstanding. In general, other registered investment companies are subject to separate reporting requirements under the Investment Company Act and are not affected by the filer statuses or other provisions discussed in this release.

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

(“AF”), and

non-accelerated filer

(“NAF”).

“Accelerated filer” and “large accelerated filer” are defined in 17 CFR 240.12b-2.

○ 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.

While undefined currently in the rules, we generally refer to registrants that are not AFs or LAFs as NAFs.

○ 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”).

15 U.S.C. 7262(b) and (c).

•

Smaller reporting company

(“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,

which notably include scaled financial statement disclosure and scaled executive compensation disclosure, among other accommodations.

The term “smaller reporting company” is defined in 17 CFR 230.405 and 17 CFR 240.12b-2.

See

section II.B below.

•

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.

The EGC accommodations are described more fully below

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.

Section 101(a) of the JOBS Act amended section 2(a) of the Securities Act and section 3(a) of the Exchange Act to define an “emerging growth company.” The JOBS Act initially defined “emerging growth company” as an issuer with less than $1 billion in total annual gross revenues, indexed to inflation. Pursuant to the statutory requirements, the current threshold is $1,235,000,000.

See Inflation Adjustments Under Titles I and III of the JOBS Act,

Release No. 33-11098 (Sept. 9, 2022) [87 FR 57394 (Sept. 20, 2022)] (adopting amendments to adjust the threshold to account for inflation).

See

discussion of EGCs in section I.D.2 below.

See

15 U.S.C. 7262(b).

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

See

General Instruction A.2 of Form 10-K and General Instruction A.1 of Form 10-Q for the filing deadlines.

EP21MY26.009

The filer status framework that has developed is layered and complex.

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

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:

See, e.g., Fun in the Summer—Navigating the Filer Status Maze,

The Corporate Counsel (May-June 2021), at 1-10 (suggesting that “the SEC and Congress have created what is often a bewildering maze of filer status tests that are used to determine when a company files its reports with the SEC and the content of those reports”).

See also

Transcript, U.S. Securities and Exchange Commission,

Small Business Forum

(Apr. 10, 2025), at 139-49,

https://www.sec.gov/files/2025-SBF-508-Transcript.pdf

(counsel panelist noting that “when I have to sit there and explain to somebody how to navigate . . . whether you're an emerging growth company or a smaller reporting company or an [accelerated] filer, their eyes glaze over and they're just like, `what are you talking about?' And I think that sort of complexity just adds to the compliance costs, it adds to the concern, and then sometimes I think it adds to the inability to access the market and report and do things in a way that is most effective for those companies”).

As used herein, “public float” is the aggregate worldwide market value of the voting and non-voting common equity held by the issuer's non-affiliates. 17 CFR 240.12b-2(i).

The data used in preparing this table is based on registrants' self-reported filer statuses on the cover page of their calendar year (“CY”) 2024 annual filings and excludes asset-backed issuers and FPIs not filing on domestic forms. While current NAFs may qualify as SRCs, registrants with no public float and annual revenues of $100 million or more do not qualify as SRCs. The SRC definition also excludes any registrant that is an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not an SRC.

See

17 CFR 229.10(f)(1).

EP21MY26.010

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

below $560 million and its revenues fall below $80 million.

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.

For an SRC whose prior annual revenues were less than $100 million, the SRC may transition as long as it meets the public float requirement and its current annual revenues are less than $100 million.

See

17 CFR 230.405 and 17 CFR 240.12b-2.

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.

Unsurprisingly, a similar time period (2009-2017) saw significant growth in private markets, with private markets regularly outpacing public markets in capital raised.

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.

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.

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.

Similar recommendations came out of prior years' forums and other roundtables.

This number of registrants is estimated as the number of unique registrants, identified by Central Index Key (“CIK”), that filed a Form 10-K, or an amendment thereto, during each year. This estimate excludes registrants that have not filed a Form 10-K and FPIs filing on Forms 20-F and 40-F. The estimate also excludes asset-backed issuers, because the disclosure and other accommodations addressed in the proposed amendments do not apply to these issuers.

See

Scott Bauguess, Rachita Gullapalli & Vladimir Ivanov,

Capital Raising in the U.S.: An Analysis of the Market for Unregistered Securities Offerings, 2009-2017,

Division of Economic and Risk Analysis, U.S. Securities and Exchange Commission (Aug. 2018),

https://www.sec.gov/files/dera-white-paper_regulation-d_082018.pdf.

See

Rongbing Huang & Donghang Zhang,

Initial Public Offerings: Motives, Mechanisms, and Pricing

The Oxford Rsch. Encyclopedia of Econ. & Fin. (Feb. 5, 2022) (surveying prior research on companies' decisions on whether and how to go public citing conditions including: cash flow considerations and economies of scope that favor mergers with larger companies, particularly in globalized industries; the centrality of intellectual property to many new companies, which attracts venture capital; alternative exit strategies and private capital availability more generally; and regulatory burden).

See also

Marshall Lux & Jack Pead,

Hunting High and Low; The Decline of the Small IPO and What to Do About It,

(M-RCBG Associate Working Paper Series No. 86), Mossavar-Rahmani Ctr. for Bus. and Gov't (Apr. 2018) (exploring the factors causing the decline in small company IPOs and finding motivating causes may include: reduced sell-side coverage; the growth of institutional investors on the buy-side; the shift from active to passive investing; growth in private capital; and increased regulatory pressures).

Transcript, U.S. Securities and Exchange Commission,

Small Business Forum

(Apr. 10, 2025), at 129-49,

https://www.sec.gov/files/2025-SBF-508-Transcript.pdf. See

U.S. Securities and Exchange Commission,

Report on the 44th Annual Small Business Forum

(Apr. 2025), at 22,

https://www.sec.gov/files/2025-oasb-annual-forum-report.pdf

(recommendation that the Commission streamline the registration process for smaller businesses).

Transcript, U.S. Securities and Exchange Commission,

Small Business Forum

(Mar. 9, 2026),

https://www.sec.gov/files/transcript-45th-sb-forum.pdf

See, e.g.,

U.S. Securities and Exchange Commission,

Report on the 43rd Annual Small Business Forum

(Apr. 2024), at 27,

https://www.sec.gov/files/2024-oasb-annual-forum-report.pdf

(recommendation to increase AF public float threshold “so that only larger filers are required to provide an auditor attestation”); U.S. Securities and Exchange Commission,

Report on the 40th Annual Small Business Forum

(May 2021), at 25,

https://www.sec.gov/files/2021_OASB_Annual_Forum_Report_FINAL_508.pdf

(recommendation to increase SRC and AF public float thresholds); U.S. Securities and Exchange Commission,

Report on the 39th Annual Small Business Forum

(Jun 2020), at 30,

https://www.sec.gov/files/2020-oasb-forum-report-final_0.pdf

(recommendation to align the SRC and NAF definitions); U.S. Securities and Exchange Commission, Office of the Advocate for Small Business Capital Formation,

Small Cap Policy Roundtable: Reassessing the Framework for Small Public Companies

(July 2025), at 9-15,

https://www.sec.gov/files/small-cap-policy-roundtable-transcript.pdf

(discussion of the complexities of filer status designations with one participant suggesting, among other things, to increase the LAF threshold up to “a $2 billion market cap” and to “eliminate the accelerated filer status completely”); U.S. Securities and Exchange Commission, Office of the Advocate for Small Business Capital Formation,

IPO Policy Roundtable: Reexamining the IPO On-Ramp

(July 2025), at 42,

https://www.sec.gov/files/ipo-roundtable-transcript.pdf

(discussion about trying to “keep the costs of accessing public markets proportionate for smaller companies”); U.S. Securities and Exchange Commission,

Investor Advisory Committee Meeting

(Mar. 12, 2026), at 56:18-59:12,

https://www.youtube.com/watch?v=y0ZrTZ-uUg0

(discussion related to reforming the categories of companies that are afforded the ability to provide scaled disclosure). The Commission's Office of the Advocate for Small Business Capital Formation has made similar observations and recommended that the Commission “consider ways to harmonize the frameworks governing Smaller Reporting Company (SRC) and Accelerated Filer definitions.”

See

U.S. Securities and Exchange Commission, Office of the Advocate for Small Business Capital Formation,

Annual Report Fiscal Year 2023

at 84,

https://www.sec.gov/files/2023-oasb-annual-report.pdf.

Additionally, the Commission's Small Business Capital Formation Advisory Committee has written that the Commission should “[e]nsure public company rules are mindful of the unique circumstances of small public companies, so that these small companies can attract capital, spur innovation, and create jobs.” Letter from U.S. Securities and Exchange Commission, Small Business Capital Formation Advisory Committee (Feb. 28, 2023), at 2,

https://www.sec.gov/files/committee-perspectives-letter-022823.pdf.

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.

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.

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.

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.

See

section I.C.

See Accelerated Filer and Large Accelerated Filer Definitions,

Release No. 34-88365 (Mar. 12, 2020) [85 FR 17178, 17183 (Mar. 26, 2020)].

See also

comments on the SRC Proposing Release described in the 2019 proposing release suggesting that these costs can divert capital from core business needs.

Amendments to the Accelerated Filer and Large Accelerated Filer Definitions,

Release No. 34-85814 (May 9, 2019) [84 FR 24876, 24880 (May 29, 2019)] (“2019 Accelerated Filer Release”).

U.S. Gov't Accountability Off.,

Sarbanes-Oxley Act: Compliance Costs are Higher for Larger Companies but More Burdensome for Smaller Ones

(June 2025),

https://www.gao.gov/assets/gao-25-107500.pdf.

See infra

notes 67, 170, and 175.

While registration and entry into the public capital markets is not always necessary or appropriate for smaller or emerging companies,

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.

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.

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.

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.

See, e.g., Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets,

Release No. 33-10763 (Mar. 4, 2020) [85 FR 17956, 17957 (Mar. 31, 2020)] (“In various circumstances, registration is not necessary, nor is it the most effective means, to achieve the objectives of the Securities Act or the Commission's mission more broadly. In recognition of the fact that registration is not always necessary or appropriate, the Securities Act contains a number of exemptions from its registration requirement and the Commission is authorized to adopt additional exemptions.”).

See, e.g., Simplified Registration and Reporting Requirements for Small Issuers,

Release No. 33-6049 (Apr. 3, 1979) [44 FR 21562 (Apr. 10, 1979)];

Small Business Initiatives,

Release No. 33-6949 (July 30, 1992) [57 FR 36442 (Aug. 13, 1992)] (adopting Regulation S-B); and

Smaller Reporting Company Regulatory Relief and Simplification,

Release No. 33-8876 (Dec. 19, 2007) [73 FR 934 (Jan. 4, 2008)] (adopting the “smaller reporting company” definition) (“SRC Adopting Release”).

Securities Offering Reform,

Release No. 33-8591 (July 19, 2005) [70 FR 44722 (Aug. 3, 2005)] (“Offering Reform Adopting Release”).

See also

17 CFR 240.13a-15(a) and 17 CFR 240.15d-15(a) and General Instruction J to Form 10-K.

See

Items 15(b) and (c) of Form 20-F and General Instruction B(6)(c) and (d) of Form 40-F.

BDCs are not registered under the Investment Company Act and, therefore, not within the exemption provided by Sarbanes-Oxley Act section 405.

See

17 CFR 230.405.

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.”

Ultimately, Congress

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).

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.

See

ICFR Adopting Release. As initially adopted, AFs were to comply with the requirements for their first fiscal year ending on or after June 15, 2004, and issuers that were not AFs on or after Apr. 15, 2005. Through a series of releases the Commission extended compliance for accelerated and non-accelerated filers.

See, e.g., Management's Report on Internal Control over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports,

Release No. 33- 8392 (Feb. 24, 2004) [69 FR 9722 (Mar. 1, 2004)] (extending compliance dates for accelerated and non-accelerated filers);

Management's Report on Internal Control over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports of Non-Accelerated Filers and Foreign Private Issuers; Extension of Compliance Dates,

Release No. 33-8545 (Mar. 2, 2005) [70 FR 11528 (Mar. 8, 2005)];

Management's Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports of Companies that Are Not Accelerated Filers,

Release No. 33-8618 (Sept. 22, 2005) [70 FR 56825 (Sept. 29, 2005)] (further postponing compliance dates for NAFs);

Internal Control over Financial Reporting in Exchange Act Periodic Reports of Foreign Private Issuers that Are Accelerated Filers,

Release No. 33-8730A (Aug. 9, 2006) [71 FR 47056 (Aug. 15, 2006)] (postponing compliance dates for FPIs and NAFs).

See also Internal Control over Financial Reporting in Exchange Act Reports of Non-Accelerated Filers and Newly Public Companies,

Release No. 33-8760

(Dec. 15, 2006) [71 FR 76580 (Dec. 21. 2006];

Internal Control over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers,

Release No. 33-8934 (June 26, 2008) [73 FR 38094 (July 2, 2008)]; and

Internal Control over Financial Reporting in Exchange Act Reports of Non-Accelerated Filers,

Release No. 33-9072 (Oct. 13, 2009) [74 FR 53628 (Oct. 19, 2009)] (further postponing compliance dates for NAFs).

15 U.S.C. 7262(c).

See supra

note 57.

In April 2011, the Commission staff published the required study and recommendations relating to section 404(b).

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

and related Commission guidance

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.

See

Staff of the Office of the Chief Accountant, U.S. Securities and Exchange Commission,

Study and Recommendations on Section 404(b) of the Sarbanes-Oxley Act of 2002 for Issuers with Public Float Between $75 and $250 Million

(Apr. 2011),

https://www.sec.gov/news/studies/2011/404bfloat-study.pdf

(“Staff Study”).

See

PCAOB Auditing Standard No. 5,

An Audit of Internal Control over Financial Reporting that Is Integrated with an Audit of Financial Statements, https://pcaobus.org/oversight/standards/archived-standards/pre-reorganized-auditing-standards-interpretations/details/Auditing_Standard_5.

See Commission Guidance Regarding Management`s Report on Internal Control over Financial Reporting Under Section 13(a) and 15(d) of the Securities Exchange Act of 1934,

Release No. 33-8810 (June 20, 2007) [72 FR 35324 (June 27, 2007)].

The staff noted that section 404(c) exempted approximately 60% of reporting issuers at that time and found strong evidence that the auditor's role in auditing the effectiveness of ICFR improves the reliability of internal control disclosures and financial reporting overall and is useful to investors.

See

Staff Study.

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.

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.

Commentators and registrants continue to express concerns regarding the costs of implementation of section 404 and the disproportionate effect on smaller issuers.

Accelerated Filer and Large Accelerated Filer Definitions,

Release No. 34-88365 (Mar. 12, 2020) [85 FR 17178 (Mar. 26, 2020)]. In expanding this exclusion, the Commission suggested, as a general matter, there may be greater costs and relatively lower benefits in including these issuers as accelerated filers, in part because these issuers may, on average, be less susceptible to certain types of restatements, such as those related to revenue recognition.

Id.

at 17188. However, the release also acknowledged concerns that eliminating the requirement for these registrants may adversely affect the effectiveness of ICFR and the reliability of the financial statements of the affected issuers with data showing that, among low-revenue issuers, accelerated filers other than EGCs (filers that are required to obtain an auditor's attestation of ICFR) have fewer Item 4.02 restatements than non-accelerated filers that are not required to comply with section 404(b).

See, e.g.,

Stephen M. Bainbridge,

Sarbanes-Oxley § 404 at Twenty,

Law-Econ Research Paper No. 22-05, UCLA School of Law (2022).

See also

Peter Iliev,

The Effect of SOX Section 404: Costs, Earnings Quality, and Stock Prices,

65 J. Fin. 1163 (2010) (seeking to measure the costs, benefits, and overall value impact of Sarbanes-Oxley Act requirements on small firms and finding the ICFR auditor attestation requirement imposes significant costs for small firms and suggesting that the costs associated with section 404 compliance outweigh the benefits for small firms).

See also

Transcript, U.S. Securities and Exchange Commission,

Small Business Forum

(Mar. 9, 2026),

https://www.sec.gov/files/transcript-45th-sb-forum.pdf,

at 141-143, 154 (participants identified section 404(b) costs as an obstacle to companies going and staying public, and observed that, in practice, the public float trigger for becoming subject to the ICFR auditor attestation requirement can be unpredictable).

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.

This eventually led in 2007 to the Commission reworking its regulatory framework for smaller registrants by establishing the “smaller reporting company” filer status.

As part of the revisions, the Commission rescinded Regulation S-B and the “small business issuer” definition.

Under the 2007 rules, all filers that were not AFs or LAFs—

i.e.,

those with less than $75 million in public float

—were designated as SRCs, and granted most of the scaled disclosure accommodations that had previously been provided to “small business issuers.”

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”).

See, e.g., Revisions to Accelerated Filer Definition and Accelerated Deadlines for Filing Periodic Reports,

Release No. 33-8617 (Sept. 22, 2005) [70 FR 56862, 56863-64 (Sept. 29, 2005)] (acknowledging the burdens registrants faced in complying with the section 404 requirements and recounting the compliance postponements the Commission instituted in response).

See

SRC Adopting Release.

Id.

Registrants without a calculable public float were accorded SRC status if their annual revenues were below $50 million.

See

SRC Adopting Release.

The Commission has solicited comments on the definition of FPIs and is considering whether the current FPI definition should be revised so that it better represents the issuers that the Commission intended to benefit from current FPI accommodations while continuing to protect investors and promote capital formation.

See Concept Release on Foreign Private Issuer Eligibility,

Release No. 33-11376 (June 4, 2025) [90 FR 24232 (June 9, 2025)] (“FPI Concept Release”). Further, concurrently with the proposed amendments outlined in this release, the Commission separately is proposing amendments to revise, among other things, the eligibility requirements for Forms S-3 and S-1.

See

Registration Offering Reform Proposal. Pursuant to the ongoing evaluation of the issues raised in the FPI Concept Release, the Commission is proposing to prohibit FPIs from using Forms S-3 and S-1.

See id.

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.

The

amendments effectively established a three-tier filer status framework:

Id.

at 935. At the time of adoption, the Commission estimated that approximately 42% of registrants would be eligible to use the scaled disclosure requirements (4,976 out of 11,898 reporting companies).

Id.

The amendments also moved certain scaled financial statement requirements from Regulation S-B into Regulation S-X.

Id.

• 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;

In conjunction with the two years of audited financial statements registrants are also permitted to provide a two-year (instead of three-year) comparison in their Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

See

17 CFR 240.14a-3(b)(1), 17 CFR 210.8-01

et seq.,

and 17 CFR 229.303.

• 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;

See

17 CFR 229.402. In addition, SRCs are only required to provide three (instead of five) years of pay versus performance disclosure.

See

17 CFR 229.402(v).

• To provide scaled golden parachute and pay versus performance disclosure;

SRCs are only required to provide golden parachute disclosure generally for three executive officers (instead of five).

See

17 CFR 229.402(t).

See also Small Business Initiatives,

Release No. 33-6949 (July 30, 1992) [57 FR 36442 (Aug. 13, 1992)]; and SRC Adopting Release.

134

See

Accelerated Filer Revisions Adopting Release at 76629-30.

See also Acceleration of Periodic Report Filing Dates and Disclosure Concerning website Access to Reports,

Release No. 33-8128 (Sept. 5, 2002) [67 FR 58480, 58482 (Sept. 16, 2002)] (“[A] public float test serves as a reasonable measure of size and market interest.”).

135

As noted in the Registered Offering Reform Proposal, our proposed elimination in that release of the minimum public float requirement in Form S-3 and with respect to eligibility for the Enhanced Registration and Communication Benefits (as defined in that release) is consistent with our proposed retention of public float in this proposal.

See supra

note 40. Our proposed elimination of a minimum public float requirement in the Registered Offering Reform Proposal is based on our belief that that eligibility to use Form S-3 and the Enhanced Registration and Communication Benefits should not depend on the extent of an issuer's market following, including analyst coverage (

e.g.,

by reference to its public float or initial Exchange Act seasoning). That proposal is not intended to suggest that public float is an inappropriate indicator of an issuer's market following.

See id.

at n. 230 (“We continue to believe that public float is relevant for determining an issuer's filer status and deadlines for filing Exchange Act reports. As we have previously stated, public float can serve as a reasonable measure of a company's size and market interest and, in turn, where investor interest in accelerated filing is likely to be highest” (citation omitted)).

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.

136

See

Accelerated Filer Revisions Adopting Release at 76636 (using data for companies listed on NYSE, Amex, NASDAQ, the Over-the-Counter Bulletin Board, and Pink Sheets LLC).

137

See

section IV.C.2. Over the period from the open of trading on Jan. 3, 2006 to the close of trading on Jan. 2, 2026, the S&P 500 Index increased from 1,248 to 6,858, an approximately 450% increase. A proportionate increase to the $700 million threshold would result in a $3.85 billion threshold. Alternatively, adjusting for inflation would result in a $1.15 billion threshold.

See

CPI Inflation Calculator,

https://www.bls.gov/data/inflation_calculator.htm

(measuring from Jan. 2006 to Jan. 2026, retrieved Apr. 15, 2026).

138

When adopting the LAF filer status, the Commission indicated that “companies with a public float of $700 million or more . . . are more closely followed by the markets and by securities analysts than other issuers” and that, “[b]ased on our experience with the accelerated filing deadlines, we continue to believe that larger issuers generally have sufficient financial reporting resources and sufficiently robust infrastructures to comply with the 60-day deadlines . . . .”

See

Accelerated Filer Revisions Adopting Release at 76629-30.

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

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.

139

See Accelerated Filer and Large Accelerated Filer Definitions,

Release No. 34-88365 (Mar. 12, 2020) [85 FR 17178, 17191 (Mar. 26, 2020)]. The Commission set the threshold for AFs and LAFs becoming NAFs at $60 million, and the threshold for exiting LAF status at $560 million.

Id.

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,

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.

140

The proposed 60-calendar month seasoning period means 60 full, consecutive calendar months and any portion of a month immediately preceding the relevant measurement date. For example, a registrant that became subject to the Exchange Act's reporting requirements on July 19, 2025 would satisfy the seasoning requirement for purposes of assessing whether it is an LAF on Aug. 1, 2030.

141

17 CFR 240.12b-2. In connection with these proposed changes, we are also proposing to eliminate paragraph (iii) of the “large accelerated filer” definition, which requires that the issuer have filed at least one annual report pursuant to section 13(a) or 15(d) of the Exchange Act, as unnecessary because a registrant would have filed several annual reports before becoming an LAF under the proposed 60 consecutive month seasoning requirement.

142

Acceleration of Periodic Report Filing Dates and Disclosure Concerning website Access to Reports,

Release No. 33-8128 (Sept. 5, 2002) [67 FR 58480, 58487 (Sept. 16, 2002)].

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.

143

As noted in section IV below, absent the proposed five-year on-ramp, the percentage of current registrants continuing on as LAFs under the proposal would increase from 19.2% to 20.7%.

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

144

For evidence of the favorable effects of EGC accommodations on IPOs, s

ee, e.g.,

Michael Dambra, Laura Casares Field & Matthew T. Gustafson,

The JOBS Act and IPO Volume: Evidence that Disclosure Costs Affect the IPO Decision,

116 J. Fin. Econ. 121 (2015) (“Dambra et al. (2015)”).

145

Under the proposed rules, an EGC that has lost its EGC status in less than five years would continue to be considered an NAF until the proposed LAF 60 consecutive calendar month on-ramp ends for that registrant.

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?

(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.

146

As proposed, asset-backed issuers would be excluded from the filer status definitions.

See

section II.B.4 for further discussion of the applicability of the proposal to asset-backed issuers.

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

147

But see

section II.B.3.b. In addition, we note that the current rules applicable to SRCs and EGCs are not applicable to asset-backed issuers. Further, as discussed below, we are proposing to extend a limited set of these accommodations to NAFs that are BDCs or face-amount certificate companies, to recognize differences in the activities and characteristics of these investment companies relative to other NAF issuers.

148

See

section IV.B.5.

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

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

149

Under the current rules, an NAF can have more than $75 million in public float if it qualifies as an SRC with annual revenues less than $100 million and public float less than $700 million.

See

17 CFR 240.12b-2.

150

The proposed amendments would not include any changes to the filing deadlines for NAFs, which under the current rules require such registrants to file their quarterly reports 45 days after fiscal quarter end, and their annual reports 90 days after fiscal year end.

But see

section II.C regarding small NAFs.

151

But see

section II.B.3.b. and

supra

note 147. To ensure that the NAF accommodations apply to Securities Act registration statements, we are proposing to define “large accelerated filer,” “non-accelerated filer,” and “small non-accelerated filer” in Securities Act Rule 405.

152

15 U.S.C. 7262(c).

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

153

In proposing to eliminate the use of the term “accelerated filer”, we are proposing to revise the definitions in Exchange Act Rule 12b-2 to remove “accelerated filer” and to revise Forms S-1, S-3, S-4, S-8, S-11, 10, 10-K, 10-Q, and 20-F to refer to NAF instead. We are also proposing to similarly revise 17 CFR 210.2-02, 17 CFR 210.3-01, 17 CFR 210.3-09, 17 CFR 210.3-12, 17 CFR 229.101, 17 CFR 229.308, 17 CFR 232.405, and 17 CFR 240.13a-10 to refer to NAF instead of “accelerated filer”.

154

In proposing to eliminate the use of the term “smaller reporting company,” we are proposing to revise the definitions in Exchange Act Rule 12b-2 and Securities Act Rule 405 to remove “smaller reporting company.” We are similarly proposing to revise Forms S-1, S-3, S-4, S-8, S-11, 10, 10-K, 10-Q, 8-K, 20-F, and Form 1-A to refer to NAF instead of SRC. We are also proposing to similarly revise Articles 8 and 15 of Regulation S-X, Regulation S-K, Exchange Act Rules 10C-1 13a-13, 13q-1, 14a-3, 14a-21, and 15d-13 to refer to NAF instead of “smaller reporting company.” We are also proposing a technical amendment to remove 17 CFR 240.15d-13(e) because paragraph (e) of Rule 15d-13 essentially repeats the language in current Rule 15d-13(d) for purposes of alternative financial reports for public utilities in a historical provision of Rule 15d-13.

See Adoption of Amendments of Certain Forms and Related Rules,

Release No. 34-13156 (Jan. 13, 1977) [42 FR 4424, 4429 (Jan. 25, 1977)].

155

17 CFR 229.10(f) currently provides a definition of “smaller reporting company” and describes the requirements of Regulation S-K that apply to SRCs. Because we are proposing to eliminate the SRC category, we are proposing to remove Item 10(f) in its entirety. In addition, we are proposing to make a technical correction to Item 10(b). When the Commission adopted rule revisions to Item 10(b)(2) in 2024, Item 10(b)(3) was inadvertently deleted.

See Special Purpose Acquisition Companies, Shell Companies, and Projections,

Release No. 33-11265 (Jan. 24, 2024) [89 FR 14158 (Feb. 26, 2024)]. We are proposing to add back the inadvertently deleted Item 10(b)(3).

156

17 CFR 230.405 currently provides a definition of “smaller reporting company.” Because we are proposing to eliminate the “smaller reporting company” category, we are proposing to remove the definition in Rule 405.

157

17 CFR 240.12b-2 currently provides definitions of “accelerated filer” and “smaller reporting company.” Because we are proposing to eliminate these, we are proposing to remove the definitions in Rule 12b-2.

158

In order to apply the NAF accommodations under the Securities Act rules we are proposing to add the definitions of “large accelerated filer,” “non-accelerated filer,” and “small non-accelerated filer” to Rule 405. In conjunction with these changes, we are proposing amendments to Forms S-1, S-3, S-4, S-8, S-11, on the cover page, and elsewhere as appropriate, to refer to the proposed categories of issuers. We are also proposing to update check box disclosures on the cover page of certain registration statements and periodic reports under which, currently, a registrant is required to identify itself as an LAF, AF, NAF, SRC, and/or EGC by replacing this with language under which a registrant would be required to identify itself as an LAF, NAF, SNF, and/or EGC. As is currently the case, a registrant would check each box that applies. For example, a registrant that is an EGC, NAF, and SNF would check all three boxes.

159

See supra

Section I.D.2. for a discussion of the JOBS Act accommodations for EGCs.

160

We are proposing to remove references to EGCs and refer instead to NAFs in Rules 2-02 and 3-02 of Regulation S-X; Items 303, 308, 402, 407, and 1011 of Regulation S-K. In their place, we propose to replace Item 10(f)

Smaller reporting companies

with a revised Item 10(f)

Emerging growth companies

that enumerates the statutory exemptions and accommodations provided to EGCs. Additionally we propose to retain the definition of “emerging growth company” in Exchange Act Rule 12b-2 and Securities Act Rule 405 and to continue to require the check boxes for EGC status in certain periodic reports and registration statements because that information may continue to be useful to investors as registrants would statutorily remain EGCs.

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.

161

See

section I.D.2.

The proposed amendments would transform what is currently a layered and complex set of filer statuses into a more streamlined structure, with the

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.

162

As discussed below, BDCs and face-amount certificate companies that are NAFs would not be permitted to rely on Article 8 of Regulation S-X, but we propose to provide certain of the accommodations in Article 8 to these entities by separate rule.

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.

163

See section IV.B.1.

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).

164

See

17 CFR 229.308. A registrant is not required to provide a report of management on the registrant's ICFR until it has either been required to file an annual report pursuant to section 13(a) or 15(d) of the Exchange Act for the prior fiscal year or has filed an annual report with the Commission for the prior fiscal year.

165

See

Rule 2-02.

166

See

PCAOB AS 2110,

Identifying and Assessing Risks of Material Misstatement,

paragraph 18,

https://pcaobus.org/oversight/standards/auditing-standards/details/AS2110.

Pursuant to AS 2110, the auditor is required to obtain a sufficient understanding of each component of internal control over financial reporting to (a) identify the types of potential misstatements, (b) assess the factors that affect the risk of material misstatement, and (c) design further audit procedures.

167

See id.,

paragraph 20. This evaluation is not for the purpose of expressing an opinion on the effectiveness of the company's ICFR.

168

See

PCAOB AS 2301,

The Auditor's Responses to the Risks of Material Misstatement,

paragraph 16,

https://pcaobus.org/oversight/standards/auditing-standards/details/AS2301.

Also, tests of controls must be performed in the audit of financial statements for each relevant assertion for which substantive procedures alone cannot provide sufficient appropriate audit evidence and when necessary to support the auditor's reliance on the accuracy and completeness of financial information used in performing other audit procedures.

See id.,

paragraph 17.

169

See

PCAOB AS 1305,

Communications About Control Deficiencies in an Audit of Financial Statements,

paragraph 4,

https://pcaobus.org/oversight/standards/auditing-standards/details/AS1305.

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

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

170

See, e.g., Study of the Sarbanes-Oxley Act of 2002 Section 404 Internal Control over Financial Reporting Requirements,

Office of Economic Analysis, U.S. Securities and Exchange Commission (Sept. 2009), at 56-67 (detailing a survey of financial executives of publicly traded companies finding benefits to section 404 compliance, but also finding that net benefits were negative); Staff Study

at 112 (“There is strong evidence that the auditor's role in auditing the effectiveness of ICFR improves the reliability of internal control disclosures and financial reporting overall and is useful to investors.”).

171

See

Staff Study at 85-87 (identifying benefits to the auditor's attestation including the disclosure of internal control deficiencies that were not previously disclosed by management and citing studies indicating that issuers that are required to comply with section 404(a) and (b) are less likely to issue materially misstated financial statements than issuers not subject to these requirements).

172

See supra

notes 64, 67, and 69.

173

See supra

note 35.

174

U.S. Gov't Accountability Off.,

Sarbanes-Oxley Act: Compliance Costs Are Higher for Larger Companies but More Burdensome for Smaller Ones

(June 2025),

https://www.gao.gov/assets/gao-25-107500.pdf.

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.

175

See Accelerated Filer and Large Accelerated Filer Definitions,

Release No. 34-88365 (Mar. 12, 2020) [85 FR 17178, n. 88 (Mar. 26, 2020)]. Commenters also indicated that effective ICFR, generally, and the ICFR auditor attestation requirement, more specifically, enhances transparency; increases the quality and reliability of issuers' financial statements, corporate governance, audits, and analyst forecasts; and reduces the number of issuers' restatements, misstatements, the instances of fraud, and occurrences of insider trading.

Id.

at notes 90 through 97 and accompanying text.

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.

176

See

section IV.B.

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.

177

See

the discussion relating to “small business issuers” in section I.A.

178

See

the discussion relating to “SRC” in section I.D. The SRC filer status was initially linked to NAF status, but subsequently the public float threshold was increased to $250 million.

179

For NAFs that are BDCs or face-amount certificate companies, we are proposing to extend most of the disclosure requirements and accommodations currently applicable to SRCs, with the exception of some financial statement provisions and performance graph disclosure.

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.

180

As proposed NAF status would include registrants currently designated as SRCs and EGCs and all registrants that meet the new, higher threshold for NAF status, which would include many registrants that are currently are AFs or LAFs.

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

This list does not include accommodations discussed in section II.B.3.b.

• More limited description of business;

182

As proposed, Item 101 would be revised and renumbered. Proposed Item 101(a) would include all of the requirements generally applicable to registrants, reflecting all of the requirements of current 17 CFR 229.101(h) (“Item 101(h) of Regulation S-K”) that currently apply to SRCs, and proposed Item 101(b) would provide the further requirements specific to LAFs. The proposed changes would remove any references to “smaller reporting companies” and move other disclosure requirements and renumber paragraphs in Item 101 as appropriate.

• Two (instead of three) years of MD&A pursuant to 17 CFR 229.303 (“Item 303 of Regulation S-K”);

183

Specifically, we are proposing to revise Instruction 1 of the Instructions to paragraph (b) of Item 303 of Regulation S-K to remove references to SRCs and EGCs and simply instruct registrants to include a discussion that covers the period covered by the financial statements included in the filing. We are additionally proposing to add a reference to Article 8 of Regulation S-X in paragraph (c) of Item 303 of Regulation S-K.

• Two (instead of three) years of summary compensation table information pursuant to 17 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

SRCs and EGCs are permitted to provide disclosure related to the grant of certain equity awards close in time to the release of material nonpublic information for three, instead of five, NEOs pursuant to 17 CFR 229.402(x). With respect to pay versus performance disclosure required by 17 CFR 229.402(v), among other accommodations, an SRC is permitted to provide three (instead of five) years of pay versus performance disclosure. As described below, an EGC is exempt from pay versus performance disclosure and we are proposing to exempt NAFs from pay versus performance disclosure.

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 to 17 CFR 229.201(e) (“Item 201(e) of Regulation S-K”), except in the case of NAFs that are investment companies;

185

Specifically, we are proposing to revise Item 201(e) of Regulation S-K by explicitly applying the rule only to LAFs and investment companies and removing Instruction 6 of

Instructions to Item 201(e)

that exempts SRCs. We are not proposing to permit investment companies that are NAFs to forgo the performance graph disclosure pursuant to Item 201(e) of Regulation S-K to maintain parity with other RICs, which are subject to similar performance graph requirements.

See

Instruction 4.g to Item 24 of Form N-2; Item 27A(d)(2) of Form N-1A. Because BDCs and RICs share similar characteristics, we believe it is beneficial to investors to maintain the existing parity in performance graph disclosure requirements. In addition, we are proposing to add a reference in Item 201(a)(1)(iii) of Regulation S-K to Article 8 of Regulation S-X because as proposed Article 3 would not necessarily apply to NAFs.

• Supplementary financial information pursuant to 17 CFR 229.302(a) (“Item 302(a) of Regulation S-K”);

186

Specifically, we are proposing to simplify Item 302 of Regulation S-K by revising Item 302(a) to refer only to LAFs, while retaining the requirements relating to FPIs. We are also proposing to remove Item 302(b).

See

section II.E below.

• Quantitative and qualitative disclosures about market risk pursuant to 17 CFR 229.305 (“Item 305 of Regulation S-K”);

187

We are proposing to amend Item 305 of Regulation S-K to only apply to LAFs by adding a reference to LAFs in proposed revised Item 305(a) and 305(b) introductory text.

• 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

188

17 CFR 229.402(s).

189

17 CFR 229.402(u), 17 CFR 229.402(l), and Instruction 8 to 17 CFR 229.402(u).

190

We are proposing to amend Item 402 of Regulation S-K to replace the references to SRC with references to NAF, to remove references to EGCs, and to add a new Item 402(a)(7) in place of Item 402(

) to provide guidance relating to NAFs.

• Policies and procedures for the review, approval, or ratification of related party transactions pursuant to 17 CFR 229.404(b) (“Item 404(b) of Regulation S-K”);

191

17 CFR 229.404(d) currently provides that SRCs are not required to provide Item 404(b) disclosure. We are proposing to limit Item 404(b) disclosure to LAFs. We are additionally proposing to make non-substantive changes to Item 404 to renumber and incorporate the

Instructions to Item 404(a)

into Item 404(a) and to revise Item 404 to remove use of the term “shall”.

• Compensation Committee Interlocks and Insider Participation disclosure, and Compensation Committee Report disclosure pursuant to 17 CFR 229.407(e)(4) and (e)(5);

192

SRCs and EGCs are currently permitted to forgo these disclosures pursuant to 17 CFR 229.407(g)(1)(ii) and (g)(2). Consistent with this, we are proposing to revise these rules to limit their application solely to LAFs.

• Audit committee financial expert disclosure in a registrant's first annual report;

193

and

193

17 CFR 229.407(d)(5) and 17 CFR 229.407(g)(1)(i).

• Certain payments made by resource extraction issuers pursuant to 17 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.

194

See

Item 1B of Form 10-K and Item 4A of Form 20-F.

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

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.

195

See

Registered Offering Reform Proposal.

196

We are proposing that all registrants be required to disclose material unresolved comments. We are not proposing to provide an accommodation to FPIs that would differ from what is available to registrants that file on domestic forms. While we recognize that FPIs are not eligible for the accommodations relating to shelf offerings, we believe that disclosure of material unresolved matters is important information for investors.

197

We are not proposing comparable changes to Item 4A of Form 20-F at this time in light of the Commission's ongoing evaluation of the definition of FPI.

See

further discussion of this issue in section II.B.4.

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,

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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:

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Specifically, we propose to revise 17 CFR 240.14a-3(b)(1) to permit NAFs to prepare their financial statements in accordance with Article 8 and to amend Article 8 to specify that the Article may be applied to financial statements of NAFs.

• Apply the form and content requirements of Article 8, with a few limited exceptions as specified in Rule 8-01,

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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

199

Rule 8-01(b) allows SRCs to comply with the form and content required by Article 8 and not the other form and content requirements in Regulation S-X, with the exception of the following: (1) the report and qualifications of the independent accountant requirements in 17 CFR 210.2-01 through 210.2-07; (2) the description of accounting policies in 17 CFR 210.4-08(n); and (3) the financial accounting and reporting standards specified in 17 CFR 210.4-10 with respect to oil and gas producing activities. Additionally, there are other rules in Article 8 that direct SRCs to other requirements in Regulation S-X that must be complied with, including: Rule 8-01(c) (the requirements of 17 CFR 210.3-10, for periods required by Rule 8-02, are applicable to financial statements for a subsidiary of an SRC that issues securities guaranteed by the SRC or guarantees securities issued by the SRC, and disclosures about guarantors and issuers of guaranteed securities registered or being registered must be presented as required by 17 CFR 210.13-01); Rule 8-01(d) (the requirements of 17 CFR.210.3-16, for periods required by Rule 8-02, or 17 CFR 210.13-02 are applicable if an SRC's securities registered or being registered are collateralized by the securities of the SRC's affiliates, relying on 17 CFR 210.13-02 unless 17 CFR 210.3-16 applies.); Rule 8-01(f) (specifying that 17 CFR 210.3-06 applies to the preparation of financial statements of SRCs); Rule 8-03(b)(5) (requires the information required by 17 CFR 210.3-04 related to changes in stockholders' equity and noncontrolling interests to be presented for the current and comparative year-to-date periods, with subtotals for each interim period); Rule 8-04 (requires SRCs to apply 17 CFR 210.3-05 related to financial statements of businesses acquired or to be acquired, substituting Rule 8-02 and Rule 8-03 for Rule 3-01 and Rule 3-02); Rule 8-05 (requires SRCs to provide pro forma financial information complying with 17 CFR 210.11-01 through 17 CFR 210.11-03 when any conditions in 17 CFR 210.11-01 exist, except it may be condensed pursuant to Rule 8-03(a)); Rule 8-06 (requires SRCs to apply 17 CFR 210.3-14 related to real estate operations acquired or to be acquired, substituting Rule 8-02 and Rule 8-03, for Rule 3-01 and Rule 3-02).

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NAFs would not be required to comply with: (1) 17 CFR 210.5-01 through 210.5-07 (Article 6) applicable to financial statements of commercial and industrial companies; (2) 17 CFR 210.7-01 through 210.7-05 (Article 7) applicable to financial statements of insurance companies; and (3) 17 CFR 9-01 through 210.9-07 (Article 9) applicable to financial statements of bank holding companies, savings and loan holding companies, and banks and savings and loan associations.

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There is no equivalent to Rule 3-09 in Article 8 requiring separate financial statements of significant majority-owned subsidiaries not consolidated and 50% or less owned persons accounted for by the equity method of accounting. Such separate financial statements, however, should be provided if they are material to investors.

• 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.

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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.

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In addition to these substantive changes, we are proposing some additional non-substantive revisions to Article 8, including moving unnumbered text in 17 CFR 210.8-01 into Rule 8-01 and renumbering Rule 8-01(a). Further, where our rules reference SRCs in relation to Article 8, we are proposing to replace such references with a reference to NAFs.

See, e.g.,

Instruction 6 of

Instructions to Item 504

(where we additionally make non-substantive revisions to remove the use of “shall”).

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.”

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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

203

Each of Rule 3-09 and 4-08(g) refers to “50% or less-owned persons”, which Commission staff have interpreted as referring to an investment accounted for using the equity method, even if voting ownership exceeds 50%.

204

See

17 CFR 210.1-02(bb) (“Rule 1-02(bb)”). Currently, under the Commission staff's view analogizing Rule 8-03(b)(3) to annual periods, an SRC would quantify the equity investees' revenues, gross profit, income from continuing operations, and net income, whereas non-SRCs complying with Rule 4-08(g) would disclose the summarized balance sheet and income statement items specified in Rule 1-02(bb). U.S. Securities and Exchange Commission, Division of Corporation Finance,

Financial Reporting Manual

(“FRM”), at §§ 2400.3, 2420.9. The statements in the FRM and any other

staff statements or guidance referenced in this release represent the views of Commission staff. Any such staff statements are not a rule, regulation, or statement of the Commission. Further, the Commission has neither approved nor disapproved their content. These statements, like all staff statements, have no legal force or effect; they do not alter or amend applicable law, and they create no new or additional obligations for any person. As proposed, an NAF that is currently an SRC would be required to disclose certain items specified in Rule 1-02(bb) that are not currently required for annual periods. We do not believe the proposed change would add a significant burden because SRC registrants may already have been disclosing some of this information, such as select balance sheet information, pursuant to existing disclosure requirements of U.S. GAAP (

e.g.,

FASB ASC 323-10-50-3(c)).

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,

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using the higher 20 percent threshold currently required under Article 8.

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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.

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Further, we do not believe these proposed revisions would represent a significant change in practice from that currently applied by SRCs.

205

Rule 8-03(b)(3) states that significance should be determined based on a registrant's consolidated assets, equity or income from co

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