Following its recent proposal to allow semi-annual financial reporting, the U.S. Securities and Exchange Commission (SEC) is now proposing a new set of rule changes designed to make it easier, and cheaper, for companies to go public.
The SEC unveiled two sets of new rule proposals on Tuesday — one that seeks to reform registered offering requirements, and another that would expand the availability of less stringent disclosure requirements to a larger crop of companies.
Among other things, the proposed reform to offering requirements would expand eligibility for companies to use shelf offerings by dropping certain transaction size stipulations, and doing away with the requirement that companies be a reporting issuer for 12 months. The SEC estimates the revisions could increase the number of issuers that can use the shelf offering process by 60%.
It’s also proposing to lower the bar on what can be considered a “well known, seasoned issuer” (WKSI) to expand access to the communication and registration benefits that come from WKSI status.
Other proposed changes include reforms to make it easier to launch multi-state offerings, streamlining registration requirements and enabling broker-dealers to provide research coverage for a greater number of public companies.
Taken together, the proposals are “designed to increase efficiency, flexibility and cost savings for public companies,” the SEC said in a release.
At the same time, it’s also proposing rule changes to streamline the reporting requirements for public companies, which would, among other things, reduce the number of companies that are considered “large accelerated filers” — meaning that they need an auditor’s sign-off on their internal controls — by raising the public float threshold for this status to US$2 billion from US$700 million, amid other changes.
The regulator estimated that the changes would mean that “large accelerated filer” requirements only apply to 19.2% of companies, down from 35.4% currently.
“The proposed amendments would extend disclosure scaling and other accommodations currently utilized by smaller or emerging companies to approximately 81% of all current public companies,” it said — adding that newly public companies would also qualify for these accommodations for at least five years.
Additionally, the smallest public companies would also get extra time to file their financial disclosures.
“These proposals build upon the legislative and regulatory concepts that have proven successful in the past and aim to extend that success to more companies — particularly small and mid-sized companies — and incentivize them to go and stay public,” said SEC chairman Paul Atkins in a statement.
“Today’s proposed rulemakings are among the first important steps toward transforming the SEC’s regulatory framework for public companies,” he added.
Both sets of proposals will be open for public comment for 60 days following their publication in the Federal Register.