During this morning’s open meeting of the Securities and Exchange Commission, which is Commissioner Piwowar’s last open meeting, the Commissioners unanimously voted to adopt amendments to the definition of smaller reporting company (SRC). The amendments had been proposed under Chair White’s leadership and have been under consideration for quite some time.
Currently, SRCs are registrants other than asset-backed issuers, investment companies and majority-owned subsidiaries of non-SRC parent companies with less than $75 million in public float as of the last business day of their most recently completed second fiscal quarter, or a public float of zero and annual revenues of less than $50 million during the most recently completed fiscal year for which audited financial statements are available. SRCs are eligible for disclosure accommodations under Regulation S-K and Regulation S-X. Commenters had been very supportive of the proposed amendments.
Today’s amendments do not address the requirements for Sarbanes-Oxley Section 404(b) auditor attestation; however, the Chair did note that the Commission Staff has been requested to study the thresholds for triggering the auditor attestation requirements and propose for the Commission’s consideration proposed amendments. While it is disappointing that today’s amendments do not address this costly requirement, the amendments do result in a significant number of companies (according to Commissioner Stein’s remarks, up to 966 companies) qualifying under the amended SRC definition for scaled disclosure. As amended, a company with a public float of less than $250 million will qualify as an SRC, as will a company with no public float, or with a public float of less than $700 million if the company has annual revenues of less than $100 million during its most recently completed fiscal year. This bifurcated approach is different from the proposed amendments.
The fact sheet can be accessed here.
A more detailed alert is available here.