Last year the Securities and Exchange Commission (SEC) adopted amendments to the definition of “smaller reporting company” (also referred to as an “SRC”). In the final rule release, available here, the SEC explained that these amendments also changed the relationship between the SRC and “accelerated filer” definitions by allowing a company to qualify as both an SRC and an accelerated filer at the same time.
The SEC acknowledged the regulatory complexity of this new relationship and, in a Compliance & Disclosure Interpretation available on its website, clarified that a company qualifying as both an accelerated filer and an SRC will remain subject to the requirements that apply to accelerated filers. See Division of Corporation Finance’s Compliance & Disclosure Interpretations for Regulation S-K, Question 102.01. Among the more technical of these complexities is the question of which box to check on the cover page of SEC filings. Prior to the new rule, registrants were instructed to check the box on the cover page of Securities Act Forms S-1, S-3, S-4, S-8 and S-11 and Exchange Act Forms 10, 10-Q and 10-K, to select either “smaller reporting company” or “accelerated filer” status, but not both. Now, registrants are instructed to check all applicable boxes, so an SRC that is also an accelerated filer will check both boxes.
An SRC that is also an accelerated filer will still enjoy many of the accommodations afforded to SRCs, but not all of them. The below charts summarize the scaled disclosure and other accommodations available for an SRC and further confirm whether an SRC that is also an accelerated filer may take advantage of each such accommodation:
I. Regulation S-K
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Item
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Scaled Disclosure Accommodation
for Smaller Reporting Company
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Available to SRC which is also an Accelerated Filer?
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101 - Description of Business
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May satisfy disclosure obligations by describing the development of the company’s business during the last three years rather than five years. Business development description requirements are less detailed than disclosure requirements for non-SRCs.
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Yes, but accelerated filers must also disclose whether you make available free of charge on your website your annual, quarterly and current reports as soon as reasonably practicable after filed with or furnished to the SEC.
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201 - Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
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Stock performance graph not required.
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Yes
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301 – Selected Financial Data
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Not required.
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Yes
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302 – Supplementary Financial Information
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Not required.
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Yes
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303 – Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
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Two-year MD&A comparison rather than three-year comparison.
Two year discussion of impact of inflation and changes in prices rather than three years.
Tabular disclosure of contractual obligations not required.
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Yes
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305 – Quantitative and Qualitative Disclosures About Market Risk
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Not required.
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Yes
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308 - Internal control over financial reporting.
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Not required to provide the registered public accounting firm's attestation report on the registrant's internal control over financial reporting in the registrant's annual report.
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No, accelerated filers must provide the registered public accounting firm's attestation report on the registrant's internal control over financial reporting in the registrant's annual report, as required by Section 404(b) of the Sarbanes-Oxley Act of 2002.
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402 – Executive Compensation
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Three named executive officers rather than five.
Two years of summary compensation table information rather than three.
Not required:
- Compensation discussion and analysis.
- Grants of plan-based awards table.
- Option exercises and stock vested table.
- Pension benefits table.
- Nonqualified deferred compensation table.
- Disclosure of compensation policies and practices related to risk management.
- Pay ratio disclosure.
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Yes
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404 – Transactions With Related Persons, Promoters and Certain Control Persons
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Description of policies/procedures for the review, approval or ratification of related party transactions not required.
Not required to disclose policies and procedures for approving related person transactions.
This is the one item where the requirements for SRCs are more stringent than those for larger reporting companies. While larger reporting companies have to disclose related person transactions in excess of $120,000, SRCs must disclose transactions that exceed the lesser of $120,000 or 1% of average total assets at year-end for the two most recently completed fiscal years. In addition, SRCs are required to (i) provide additional disclosure about underwriting discounts and commissions and corporate parents; and (ii) provide disclosure regarding promoters and certain control persons.
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Yes, and the more stringent requirements for SRCs also apply.
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407 – Corporate Governance
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Audit committee financial expert disclosure not required in first annual report.
Compensation committee interlocks and insider participation disclosure not required.
Compensation committee report not required.
Disclosure of hedging policies in proxy and information statements not required until fiscal years beginning on or after July 1, 2020.
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Yes, except as set forth below.
No, accelerated filers will need to disclose their hedging policies in their proxy and information statements for fiscal years beginning on or after July 1, 2019.
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503 – Prospectus Summary, Risk Factors and Ratio of Earnings to Fixed Charges
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No ratio of earnings to fixed charges disclosure required.
No risk factors required in Exchange Act filings.
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Yes
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601 – Exhibits
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Statements regarding computation of ratios not required.
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Yes
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II. Regulation S-X
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Rule
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Scaled Disclosure Accommodation
for Smaller Reporting Company
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Available to SRC which is an Accelerated Filer?
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8-02 – Annual Financial Statements
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Two years of income statements rather than three years.
Two years of cash flow statements rather than three years.
Two years of changes in stockholders’ equity statements rather than three years.
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Yes
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8-03 – Interim Financial Statements
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Permits certain historical financial data in lieu of separate historical financial statements of equity investees.
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Yes
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8-04 – Financial Statements of Businesses Acquired or to Be Acquired
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Maximum of two years of acquiree financial statements rather than three years.
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Yes
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8-05 – Pro forma Financial Information
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Fewer circumstances under which pro forma financial statements are required.
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Yes
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8-06 – Real Estate Operations Acquired or to Be Acquired
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Maximum of two years of financial statements for acquisition of properties from related parties rather than three years.
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Yes
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8-08 – Age of Financial Statements
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Less stringent age of financial statements requirements.
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No, accelerated filers must comply with age of financial statement requirements for accelerated filers set forth in Item 3-12 of Regulation S-X.
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III. Exchange Act Reports
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Form
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Scaled Disclosure Accommodation
for Smaller Reporting Company
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Available to SRC which is an Accelerated Filer?
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Form 10-K
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Due within 90 days after the end of the fiscal year
Item 1B (Unresolved Staff Comments) does not apply.
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No, the annual report for accelerated filers is due within 75 days after the end of the fiscal year covered by the report.
No, if the registrant is an accelerated filer and has received written comments from the SEC staff regarding its reports and such comments remain unresolved, it must disclose the substance of any such material unresolved comments.
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Form 10-Q
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Due within 45 days after the end of the fiscal quarter
Required to use Inline XBRL beginning with their first Form 10-Q filing for the fiscal period ending on or after June 15, 2021. This will also apply to Form 10-K filings after this date.
Required to tag all cover page data for Form 10-K, Form 10-Q and Form 8-K in Inline XBRL beginning with their first Form 10-Q filing for the fiscal period ending on or after June 15, 2021.
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No, the quarterly report for accelerated filers is due within 40 days after the end of the fiscal quarter.
No, accelerated filers are required to use Inline XBRL with their first Form 10-Q filing for the fiscal period ending on or after June 15, 2020. This will also apply to Form 10-K filings after this date.
No, accelerated filers are required to tag all cover page data for Form 10-K, Form 10-Q and Form 8-K in Inline XBRL beginning with their first Form 10-Q filing for the fiscal period ending on or after June 15, 2020.
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We invite you to contact us directly if you have any questions navigating this new filer status relationship.
