SEC-Pulse-blog-masthead

SEC Proposes Amendments to Accelerated and Large Accelerated Filer Definitions

Posted by Howard Berkenblit on May 9, 2019 at 12:48 PM

The SEC today voted to propose amendments to the definitions of "accelerated filer" and "large accelerated filer," which are used to determine, among other things, the filing deadlines for periodic reports and the requirement for providing an audit of internal control over financial reporting (ICFR). 

The proposed amendments would better align the definition of accelerated filer with recent changes to the definition of "smaller reporting company" (SRC). The amendments would:

  • Exclude from the accelerated and large accelerated filer definitions an issuer that is eligible to be an SRC and had no revenues or annual revenues of less than $100 million in the most recent fiscal year for which audited financial statements are available
  • Increase the transition thresholds for accelerated and large accelerated filers becoming a non-accelerated filer from $50 million to $60 million and for exiting large accelerated filer status from $500 million to $560 million
  • Add a revenue test to the transition thresholds for exiting both accelerated and large accelerated filer status

As a result of the proposed amendments, smaller reporting companies with less than $100 million in revenues would not be required to obtain an attestation of their ICFR from an independent outside auditor. 

The proposals will be subject to a 60-day public comment period, following which the SEC will determined its next steps.

Topics: SEC, SEC Filings, Securities and Exchange Commission, Accelerated Filing

SEC Proposes Changes to REG S-X

Posted by Howard Berkenblit on May 6, 2019 at 12:34 PM

The Securities and Exchange Commission proposed amendments to the financial disclosure requirements in Rules 3-05, 3-14, and Article 11 of Regulation S-X, as well as related rules and forms, for financial statements of businesses acquired or to be acquired and for business dispositions. The proposed changes are intended to (1) improve for investors the financial information about acquired and disposed businesses; (2) facilitate more timely access to capital; and (3) reduce the complexity and cost to prepare the disclosure. The proposals will be subject to public comment, following which the SEC may make additional revisions before adopting any changes.

The proposed changes would, among other things:

  • update the significance tests under these rules by revising the investment test and the income test, expanding the use of pro forma financial information in measuring significance, and conforming the significance threshold and tests for a disposed business;
  • require the financial statements of the acquired business to cover up to the two most recent fiscal years rather than up to the three most recent fiscal years;
  • permit disclosure of financial statements that omit certain expenses for certain acquisitions of a component of an entity;
  • clarify when financial statements and pro forma financial information are required;
  • permit the use in certain circumstances of, or reconciliation to, International Financial Reporting Standards as issued by the International Accounting Standards Board;
  • no longer require separate acquired business financial statements once the business has been included in the registrant’s post-acquisition financial statements for a complete fiscal year;
  • align Rule 3-14 with Rule 3-05 where no unique industry considerations exist;
  • clarify the application of Rule 3-14 regarding the determination of significance, the need for interim income statements, special provisions for blind pool offerings, and the scope of the rule’s requirements;
  • amend the pro forma financial information requirements to improve the content and relevance of such information; more specifically, these improvements would include disclosure of "Transaction Accounting Adjustments," reflecting the accounting for the transaction; and "Management’s Adjustments," reflecting reasonably estimable synergies and transaction effects; and
  • make corresponding changes to the smaller reporting company requirements in Article 8 of Regulation S-X.

Topics: Securities and Exchange Commission, Rule 3-14, Regulation S-X, Rule 3-05

Simplification of FAST Act Disclosure Requirements

Posted by Jeffrey Morlend on March 22, 2019 at 10:37 AM

The SEC recently adopted amendments pursuant to the Fixing America’s Surface Transportation Act (commonly referred to as the FAST Act) to modernize and simplify disclosure requirements in Regulation S-K, and related rules and forms, for public companies, investment advisers and investment companies. Such amendments include changes to, among others, Item 102 (Description of Property), Item 303 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), Item 503 (Prospectus Summary and Risk Factors), Item 601 (Exhibits) and various rules related to incorporation by reference.

Among the most impactful changes are:

  1. Allowing companies to generally exclude discussion of the earliest of three years required by Item 303 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) if such discussion has already been included in a prior filing. 
  1. Limiting the disclosure required by Item 102 (Description of Property) to only those physical properties that are material.
  1. With respect to exhibits to SEC filings (Item 601):

(a) Allowing companies to omit attachments such as schedules and exhibits to their material contracts filed as exhibits to SEC filings if such attachments don't contain material information or were not otherwise disclosed.

(b) Eliminating the requirement (other than for newly reporting companies) to file as exhibits material contracts that were entered into less than two years before that filing.

(c) Permitting companies to omit from material contracts and certain other exhibits to SEC filings confidential information that is not material and would likely cause such companies competitive harm if made public, without requiring companies to first file confidential treatment requests.

(d) Eliminating the requirement to file as an exhibit to SEC filings any document that is incorporated by reference in such filing, but instead requiring companies to provide hyperlinks to documents incorporated by reference.

  1. Permitting companies to omit disclosure about Section 16 reports if all reports have been timely filed (and eliminating the box on the cover of Form 10-Ks regarding Section 16 disclosure).

The rules also add a few requirements regarding Inline XBRL tagging of cover pages, among others.

Registrants will be required to disclose on the cover page of Forms 8-K, 10-Q, 10-K, 20-F and 40-F the national exchange or principal U.S. market for their securities, their trading symbol and the title of each class of securities.

The final rules, which can be found here, are effective 30 days after publication in the federal register, except for the amendments to the rules governing the redaction of confidential information in material contracts referenced in Item 3(c) above, which are effective as of the date of publication in the federal register.

Topics: FAST Act, SEC Filings, Securities and Exchange Commission, Disclosure Agreements

SEC Issues Concept Release about Quarterly Reporting

Posted by Howard Berkenblit on December 19, 2018 at 12:22 PM

The SEC has issued a comment release soliciting input on many questions related to quarterly reporting. The release covers a lot of possible scenarios, any or none of which may occur. The format, as with many releases of this nature, has some limited analysis but is more dominated by questions as to which the public is invited to comment. As expected, there are some questions on whether quarterly reporting should be eliminated or changed to semi-annual, and if so, if this should only be for certain types of issuers (such as smaller reporting companies or emerging growth companies). Perhaps more interesting, there are a lot more questions and discussion of potential ways to combine quarterly earnings releases with Quarterly Reports on 10-Q, given their overlap and proximity in release/filing times. The thrust of many of the questions seems to be if there are ways to reduce redundancy without delaying the process.

Topics: reporting requirements, Securities and Exchange Commission

SEC Adopts Rules for Disclosure of Hedging Policies

Posted by Howard Berkenblit on December 19, 2018 at 9:56 AM

Yesterday (without a meeting), the SEC approved final rules to require companies to disclose in proxy or information statements for the election of directors any practices or policies regarding the ability of employees or directors to engage in certain hedging transactions with respect to company equity securities. This rulemaking had been mandated by the Dodd-Frank Act in 2010 and had sat in proposal form for several years. 

Under the new rules, new Item 407(i) of Regulation S-K will require a company to describe any practices or policies it has adopted regarding the ability of its employees (including officers) or directors to purchase securities or other financial instruments, or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of equity securities granted as compensation, or held directly or indirectly by the employee or director. A company could satisfy this requirement by either providing a fair and accurate summary of the practices or policies that apply, including the categories of persons they affect and any categories of hedging transactions that are specifically permitted or specifically disallowed, or, alternatively, by disclosing the practices or policies in full. If the company does not have any such practices or policies, the rule will require the company to disclose that fact or state that hedging transactions are generally permitted.

Companies generally must comply with the new disclosure requirements in proxy and information statements for the election of directors during fiscal years beginning on or after July 1, 2019. However, smaller reporting companies and emerging growth companies do not have to comply until their proxy and information statements for the election of directors during fiscal years beginning on or after July 1, 2020. Listed closed-end funds and foreign private issuers will not be subject to the new disclosure requirements.

Topics: Dodd-Frank, Securities and Exchange Commission, Regulation S-K

SEC Requires "Inline XBRL"

Posted by Howard Berkenblit on June 28, 2018 at 4:52 PM

Today the SEC adopted amendments to eXtensible Business Reporting Language (XBRL) requirements for operating companies and funds. The amendments are intended to improve the quality and accessibility of XBRL data by replacing the existing requirements for tagged data to be filed as exhibits to certain SEC filings and posted as separate files on companies’ websites. The amendments, which will go into effect in phases, require the use of Inline XBRL for financial statement information and risk/return summaries.    

While the amendments modify existing XBRL requirements, they do not change the categories of filers or scope of disclosures subject to XBRL requirements, nor do they change the relevant liability standards.

Operating companies that are currently required to submit financial statement information in XBRL will be required, on a phased basis, to transition to Inline XBRL, with large accelerated filers that use U.S. GAAP being required to comply beginning with fiscal periods ending on or after June 15, 2019, accelerated filers that use U.S. GAAP being required to comply beginning with fiscal periods ending on or after June 15, 2020, and all other filers being required to comply beginning with fiscal periods ending on or after June 15, 2021. Filers will be required to comply beginning with their first Form 10-Q (not 10-K) filed for a fiscal period ending on or after the applicable compliance date.

Funds that are currently required to submit risk/return summary information in XBRL will be required, on a phased basis, to transition to Inline XBRL, with large fund groups (net assets of $1 billion or more as of the end of their most recent fiscal year) being required to comply two years after the effective date of the amendments and all other funds being required to comply three years after the effective date of the amendments. The amendments also eliminate the 15 business day filing period for risk/return summary XBRL data, so that the data will be more timely available to the public.

Topics: SEC, GAAP, Securities and Exchange Commission, Inline XBRL, eXtensible Business Reporting Language

SEC issues guidance on cybersecurity disclosures

Posted by Howard Berkenblit on February 21, 2018 at 3:07 PM

The SEC posted today an interpretive release regarding its latest guidance public companies’ disclosure obligations under existing law with respect to matters involving cybersecurity risk and incidents. It also addresses the importance of cybersecurity policies and procedures and the application of disclosure controls and procedures, insider trading prohibitions, and Regulation FD and selective disclosure prohibitions in the cybersecurity context.

The timing of the release was a bit unusual. Initially, the SEC was scheduled to consider the guidance at an open meeting on February 21st. It abruptly cancelled the meeting and instead put out a press release saying the interpretive guidance had been approved on February 20th. Sounds like the SEC may be having its own issues with disclosure controls and procedures!

Topics: cybersecurity, SEC, Securities and Exchange Commission, Regulation FD

NYSE Rule Change: Material News at End of the Day

Posted by Howard Berkenblit on December 6, 2017 at 11:11 AM

The SEC has approved a NYSE rule that will prohibit listed companies from issuing material news after the official closing time of trading until at least 5 minutes after closing (unless the company’s official closing price is published sooner).

Topics: SEC, New York Stock Exchange, NYSE, Securities and Exchange Commission

Sullivan 4c

About the Blog


The SEC Pulse provides updates and commentary from our Capital Markets Group on issues affecting publicly traded and privately owned businesses, investment banks and foreign companies who trade or raise capital in the United States, and boards of directors and company officers in securities transactions and corporate governance matters.

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

Subscribe to Blog

Recent Posts

Posts by Topic

see all