The SEC has proposed an updated change regarding the definition and subsequent qualification of a SRC: smaller reporting company.
Today, US issuers qualify as a SRC if they either 1.) have a public float of less than $75 million or 2.) for issuers without a public float, annual revenues of less than $50 million.
The benefit of being a SRC company is a lighter disclosure burden under Regulation S-K and Regulation S-X including only having to disclose two years of audited financial statements and zero Compensation Discussion & Analysis reporting responsibility.
The new update would allow issuers to be re-classified as a SRC if they have 1.) a public float of less than $250 million or 2.) for companies without a public float, annual revenues of less than $100 million.
The updates are projected to reduce the work burden and costs for reporting (while still protecting investors) for close to 800 current non-SRC issuers… about 11% of all SEC reporting issuers.
One point: issuers with more than $75 million in public float, even if reclassified as a SRC, are still accelerated filers. Their 10-Q and 10-K filings deadlines do not change nor does their Sarbanes-Oxley 404 auditor verification reporting. Also, a SDC is still required to file XBRL –our team will assist in keep those fees low and accuracy high.
If all that is not confusing enough, a SRC can also be an EGC which may be not have SOX responsibilities. For sure, talk to your SEC lawyer, PDQ. You know… CYA.
Comments on the proposed rules are due August 30, 2016.