On March 12, 2020, the Securities and Exchange Commission (SEC) adopted final amendments (the final amendments) to the definitions of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Securities Exchange Act, as amended (the Exchange Act). The final amendments, as described below, reduce or eliminate, as applicable, the overlap between these definitions and the definition of "smaller reporting company" (SRC) so that smaller companies can take advantage of scaled disclosure and fewer compliance requirements. The final amendments will be effective April 27, 2020 and will first impact companies' annual reports on Form 10-K filed on or after that date. The final amendments provide that companies with annual report filings due on or after the effective date may apply the final amendments to determine their status as a non-accelerated, accelerated, or large accelerated filer even though their fiscal year end date precedes the effective date.

Background

In June 2018, the SEC adopted amendments to the SRC definition in Rule 12b-2 of the Exchange Act, but did not increase the thresholds related to accelerated filer definitions, creating overlap between the definitions of SRC and both "accelerated filer" and "large accelerated filer" definitions (the "2018 Amendments"). As a result of the 2018 Amendments, companies could qualify as both an SRC and an accelerated filer or large accelerated filer. The impact of this overlap, generally, was that SRCs could benefit from scaled disclosure only to the extent that they were not subject to accelerated filer reporting requirements. In acknowledgement of the complexities of the 2018 Amendments, the Division of Corporation Finance was directed by Chairman Jay Clayton to propose amendments to reduce the overlap in the definitions of SRC and accelerated filers such that fewer issuers would qualify as accelerated filers and be subject to the associated reporting requirements. The final amendments aim to advance this objective.

Final 2020 Amendments: Key Takeaways

• Certain SRC Eligibility Eliminated from Accelerated Filer Definitions: The final amendments amend the definitions of "accelerated filer" and "large accelerated filer" to exclude SRCs with annual revenue of less than $100 million in the most recent fiscal year for which audited financial statements are available (the SRC revenue test), reducing certain reporting burdens for these companies. Companies should note, however, that the 2020 Amendments do not change the thresholds for "accelerated filer" or "large accelerated filer" definitions. See below for a table excerpted from the adopting release for the final amendments that outlines the relationship between SRCs and filer status definitions under the final amendments.

Relationships Between SRCs and Non-Accelerated, Accelerated, and Large Accelerated Filers Under the Final Amendments
Status	Public Float	Annual Revenues
SRC and Non-Accelerated Filer	Less than $75 million	N/A
	$75 million to less than $700 million	Less than $100 million
SRC and Accelerated Filer	$75 million to less than $250 million	$100 million or more
Accelerated Filer (not SRC)	$250 million to less than $700 million	$100 million or more
Large Accelerated Filer (not SRC)	$700 million or more	N/A

• Overlap in Definitions: While the 2020 Amendments narrowed the overlap between SRC and accelerated filer status definitions, reducing reporting burdens for certain SRCs, there is still some overlap in the SRC and "accelerated filer" definitions. As a result, where a company is both an SRC and an "accelerated filer," it will need to comply with the requirements mandated of "accelerated filers," the most significant of which is Section 404(b) of the Sarbanes-Oxley Act (SOX). Under SOX 404(b), a company must include an auditor's attestation report regarding its internal controls over financial reporting in its Form 10-K.
• Exiting Filer Status: Public float thresholds for exiting a filer status were amended to allow issuers to exit a filer status at a higher threshold public float or in circumstances where they meet the SRC revenue test. The final amendments revise the public float transition threshold for an "accelerated filer" or "large accelerated filer" to become a "non-accelerated" filer from $50 million to $60 million and revise the public float transition threshold for a "large accelerated filer" to lose its "large accelerated filer" status from $500 million to $560 million. In each instance, the exiting thresholds are subject to the SRC revenue test. The measuring date for companies' determination of filer status remains the last business day of the most recently completed second fiscal quarter.
  • For example, a "large accelerated filer" would become an "accelerated filer" at the end of its fiscal year if its public float fell to between $60 million and $560 million as of the last business day of its most recently completed second fiscal quarter and its annual revenues were not below $100 million. A "large accelerated filer" and an "accelerated filer" would each become a "non-accelerated filer" if its public float fell below $60 million as of the last business day of its most recently completed second fiscal quarter or its annual revenues fell below $100 million.
  • See below for a table excerpted from the adopting release for the final amendments that outlines how a company's filer status would change based on the public float thresholds. Note that the SRC revenue test applies to these.

Final Amendments to the Public Float Thresholds
Initial Public Float Determination	Resulting Filer Status	Subsequent Public Float Determination	Resulting Filer Status
$700 million or more	Large Accelerated Filer	$560 million or more	Large Accelerated Filer
		Less than $560 million but $60 million or more	Accelerated Filer
		Less than $60 million	Non-Accelerated Filer
Less than $700 million but $75 million or more	Accelerated Filer	Less than $700 million but $60 million or more	Accelerated Filer
		Less than $60 million	Non-Accelerated Filer

SRC Relief Under the Final Amendments

Under the final amendments, SRCs that meet the SRC revenue test will have relief from certain reporting requirements:

• Filing Deadlines: SRCs that meet the SRC revenue test will be non-accelerated filers, allowing them to file their annual and quarterly reports later than the timing deadlines for accelerated filers. Non-accelerated filer timing deadlines are as follows:
  • Annual reports may be filed 90 days instead of 75 days after the end of the period.
  • Quarterly reports may be filed 45 days instead of 40 days after the end of the period.
• Reduced Disclosure: SRCs that meet the SRC revenue test will also not have to provide the disclosure required by Item 1B of Form 10-K and Item 4A of Form 20-F regarding unresolved staff comments on its SEC filings or the disclosure required by Item 101(e)(4) of Regulation S-K regarding the availability of the company's filings on its corporate website.
• SOX 404(b) Auditor Attestation: SRCs that meet the SRC revenue test will not be subject to SOX 404(b) auditor attestation. Note that SRCs will still be subject to other SOX requirements, including:
  • CEO and CFO certifications;
  • the requirement to maintain internal controls over financial reporting (ICFR) and have management assess ICFR effectiveness;
  • reporting on the effectiveness of disclosure controls and procedures; and
  • auditing of financial statements by an independent auditor who is required to consider ICFR in the performance of such audit.
    • Note that companies that qualify as emerging growth companies (EGCs) under the Jumpstart our Businesses Act (JOBS Act) are exempt from the auditor attestation requirement for up to five fiscal years after the completion of their initial public offerings. For EGCs that qualify as SRCs and meet the SRC revenue test, they will be able to continue to be exempt from the auditor attestation requirements under SOX 404(b) after losing their EGC status so long as they remain an SRC and meet the SRC revenue test.
• Form Cover Page Changes: Cover pages of Forms 10-K, 20-F, and 40F will now include a checkbox to indicate whether a Section 404(b) auditor attestation is included in the filing. This checkbox will be subject to applicable requirements to tag cover page data using iXBRL. Companies should ensure that the are using the revised Form 10-K cover page for any filings made on or after April 27, 2020.

For further information, please contact any member of the Wilson Sonsini's public company representation practice group.