On March 12, 2020, the Securities and Exchange Commission (SEC) adopted final amendments (the final amendments) to the definitions of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Securities Exchange Act, as amended (the Exchange Act). The final amendments, as described below, reduce or eliminate, as applicable, the overlap between these definitions and the definition of "smaller reporting company" (SRC) so that smaller companies can take advantage of scaled disclosure and fewer compliance requirements. The final amendments will be effective April 27, 2020 and will first impact companies' annual reports on Form 10-K filed on or after that date. The final amendments provide that companies with annual report filings due on or after the effective date may apply the final amendments to determine their status as a non-accelerated, accelerated, or large accelerated filer even though their fiscal year end date precedes the effective date.
Background
In June 2018, the SEC adopted amendments to the SRC definition in Rule 12b-2 of the Exchange Act, but did not increase the thresholds related to accelerated filer definitions, creating overlap between the definitions of SRC and both "accelerated filer" and "large accelerated filer" definitions (the "2018 Amendments"). As a result of the 2018 Amendments, companies could qualify as both an SRC and an accelerated filer or large accelerated filer. The impact of this overlap, generally, was that SRCs could benefit from scaled disclosure only to the extent that they were not subject to accelerated filer reporting requirements. In acknowledgement of the complexities of the 2018 Amendments, the Division of Corporation Finance was directed by Chairman Jay Clayton to propose amendments to reduce the overlap in the definitions of SRC and accelerated filers such that fewer issuers would qualify as accelerated filers and be subject to the associated reporting requirements. The final amendments aim to advance this objective.
Final 2020 Amendments: Key Takeaways
Relationships Between SRCs and Non-Accelerated, Accelerated, and Large Accelerated Filers Under the Final Amendments | ||
Status | Public Float | Annual Revenues |
SRC and Non-Accelerated Filer | Less than $75 million | N/A |
$75 million to less than $700 million | Less than $100 million | |
SRC and Accelerated Filer | $75 million to less than $250 million | $100 million or more |
Accelerated Filer (not SRC) | $250 million to less than $700 million | $100 million or more |
Large Accelerated Filer (not SRC) | $700 million or more | N/A |
Final Amendments to the Public Float Thresholds | |||
Initial Public Float Determination | Resulting Filer Status | Subsequent Public Float Determination | Resulting Filer Status |
$700 million or more | Large Accelerated Filer | $560 million or more | Large Accelerated Filer |
Less than $560 million but $60 million or more | Accelerated Filer | ||
Less than $60 million | Non-Accelerated Filer | ||
Less than $700 million but $75 million or more | Accelerated Filer | Less than $700 million but $60 million or more | Accelerated Filer |
Less than $60 million | Non-Accelerated Filer |
SRC Relief Under the Final Amendments
Under the final amendments, SRCs that meet the SRC revenue test will have relief from certain reporting requirements:
For further information, please contact any member of the Wilson Sonsini's public company representation practice group.