Investors Should Be Watching More Than Just the SEC’s Proposal on Semiannual Reporting: Filer Status Reform May Further Reduce Disclosures

Investors Should Be Watching More Than Just the SEC’s Proposal on Semiannual Reporting: Filer Status Reform May Further Reduce Disclosures The Securities and Exchange Commission’s (SEC) proposal on semiannual reporting has grabbed the headlines. That’s not surprising; investors immediately recognize what is at stake if companies are given the option to replace quarterly interim reports with semiannual reports. Investors should also be aware of another SEC proposal that has attracted far less attention: a potential overhaul of the “filer status” rules and accommodations provided to smaller and newly public companies (you know, those checkboxes on the cover of 10-Qs and 10-Ks?). Source: General Instructions to Form 10-K (SEC). The SEC says the proposal is intended to simplify the reporting framework, reduce compliance costs, and make public markets more attractive. Simplification and lower compliance costs are legitimate goals. But the proposal would also allow a much larger group of companies—including very large IPOs—to provide less disclosure, less external assurance, and fewer shareholder accountability mechanisms. Investors should consider whether the proposed relief is too broad for the protection they would lose. In today’s post, we briefly summarize some of the key aspects and consequences of the filer status reform proposal for investors who may not be sufficiently excited by the proposal’s official name (Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies) to sit down and read the 318-page proposed rule themselves. What the proposal would do Among the various amendments, the proposal would: - Streamline the current five “filer statuses” (see the checkboxes in the image above for their names) into two primary categories: large accelerated filers and non-accelerated filers. - Raise the threshold to being a large, accelerated filer to $2 billion in public float for two consecutive years and to have been public for at least five years. - Classify all other companies as non-accelerated filers. - Grant non-accelerated filers most of the accommodations now available to smaller reporting companies and emerging growth companies. More details to follow, but these include exemptions from disclosure, auditor attestation, and certain governance-related disclosure and shareholder-vote requirements. In short, many more companies would be eligible for exemptions from SEC requirements, including all IPOs for five years. Would this apply to SpaceX? And OpenAI and Anthropic if they go public, too? Yes. Under the proposal, newly listed domestic companies would be non-accelerated filers for at least five years. There is no size limit; even those with trillion-dollar market capitalizations would enjoy the applicable exemptions from SEC requirements. Which companies would be affected? The proposal would principally affect: - IPOs, which would now be non-accelerated filers for five years (up from 12 months currently) and enjoy many more exemptions to SEC requirements. - Companies that recently went public (i.e., within five years of final rule effective date) as they would be retroactively classified as non-accelerated filers – until they hit five years of seasoning. - Small caps. All companies with less than $2 billion in public float would be classified as non-accelerated filers and many of them would receive exemptions they previously did not have. To put some numbers around this, the two charts that follow compare the current and proposed frameworks in two ways: (1) the share of registrants and (2) the share of aggregate public float. The former shows a much bigger change than the latter reflecting the concentration of US public-market capitalization among the largest issuers. Sources: SEC Proposal, author’s analysis. Because the charts use 2024 data, they do not reflect IPOs completed after 2024 (e.g., SpaceX); future IPO activity (e.g., OpenAI and Anthropic potential IPOs) would also alter the eventual distribution. Finally, the proposal would generally apply only to domestic companies. Almost all foreign companies listed on US exchanges are foreign private issuers that use Form 20-F or Form 40-F and fall outside the framework under discussion. The trade-off The policy question is whether compliance cost relief is appropriately targeted. A framework designed to support smaller or newly public companies is harder to justify when it also covers exceptionally large issuers for five years. Relief should not unnecessarily reduce material information, independent assurance, or shareholder accountability, especially if issuers have significant financial means. What exemptions would non-accelerated filers get? Non-accelerated filers (i.e., recent IPOs and small caps) would be eligible for exemptions currently available to smaller reporting companies and emerging growth companies. Some of the more significant exemptions are: - Auditor attestation on internal control over financial reporting. Company management would still be required to assess and report on the effectiveness of internal controls. - Executive compensation-related exemptions. Non-accelerated filers would be exempt from - Say-on-pay votesCompensation discussion and analysis disclosuresPay ratio (i.e., CEO to median employee pay) and pay-versus-performance disclosures - Other scaled disclosure: three named executives rather than five, two years of summary compensation table information rather than three, several other tables and disclosures - Financial statement and other disclosure exemptions. Non-accelerated filers would be exempt from - Risk factor disclosures in Form 10-K and 10-Q; - Market risk disclosures; and - Provide 2 rather than 3 years of financial statements and MD&A. None of these exemptions is new, rather the proposal would expand eligibility for them. For existing public companies, just the 19% of companies that qualify as large accelerated filers would be subject to the full (non-scaled) SEC rulebook. When would investors see the impact? The SEC must review comments and decide whether to adopt final rules. The public comment deadline was July 20, 2026. An effective date would be decided at the time of adoption, as would a transition plan. The proposal does not specify an effective date, but the SEC proposed that companies would re-assess their filer status as of the last day of their fiscal year before the chosen effective date. Of course, the proposal grants accommodations and exemptions, but companies do not have to take them; companies could elect to continue reporting, auditor assurance over internal controls, and governance practices as they exist today. What should investors do? Investors should: - Identify the companies they own or cover that would move into the non-accelerated filer regime. The answers will depend on each company’s Exchange Act reporting history, its public float during the relevant measurement periods, and the final rule’s effective and transition dates. - Identify what information those companies would no longer have to provide and whether it is material. Investors might focus on executive compensation disclosures, shareholder advisory votes, ICFR auditor attestation, and risk factor disclosures. - Engage with - The SEC. While the formal comment period has ended, the SEC continues to accept and may consider comments on the proposal. - Affected companies. Investors should also engage directly with companies that are in scope would benefit from the proposal. Ask management whether they intend to use the accommodations. Ask whether audit committees and boards have considered the investor impact. Filer-status reform may sound technical, but the proposal would determine how much information, assurance, and shareholder oversight investors receive from the majority of public companies. Simplification may be warranted, but relief should be targeted and proportionate. Investors should ask whether a five-year, size-neutral exemption framework strikes the right balance, or goes further than necessary at the expense of market transparency and accountability.