Nearly 80% of all public companies could soon face significantly lighter reporting requirements, thanks to new SEC proposals to overhaul filer categories and disclosure rules. The SEC proposed amendments to its public company reporting framework on May 19, 2023, to simplify reporting and disclosure requirements and expand capital raising flexibility for smaller reporting companies, according to Crowe. The amendments aim to redefine corporate financial transparency, impacting SEC filer status and disclosure accommodations rules for 2026.
However, the SEC is pushing for greater capital-raising flexibility and simplified reporting, but this comes at the cost of reduced transparency and detailed disclosures for a majority of public companies. The tension pits corporate agility against investor access to comprehensive data.
Companies will likely experience reduced compliance costs and increased agility, while investors will need to adjust their due diligence expectations for a vast majority of public firms, potentially leading to a two-tiered information market. The SEC's proposed Filer Status Reform will deliberately diminish investor transparency for 80% of public companies, prioritizing corporate capital formation over robust public disclosure.
Overhauling Filer Categories and Thresholds
The SEC proposed rule amendments to replace the five current filer categories (LAF, AF, NAF, SRC, EGC) with two primary categories: Large Accelerated Filers (LAF) and Non-Accelerated Filers (NAF), according to JD Supra. The restructuring dramatically redefines which companies qualify for reduced reporting. The large accelerated filer public float threshold would be raised from US$700 million to US$2 billion, requiring at least 60 months of Exchange Act reporting history, according to Crowe. The new NAF category would encompass approximately 80% of all current public companies and allow them to use scaled disclosure and accommodations currently available to Small Reporting Companies (SRCs) and Emerging Growth Companies (EGCs), according to JD Supra. The expansion significantly increases the pool of firms benefiting from scaled disclosures.
