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Qualifying scope expands for smaller reporting companies

Further to the acceptance of Inline XBRL, a new amendment for companies to qualify for ‘smaller reporting companies’ has emerged last week. The changes constructed by the US Security Exchange Commission (SEC) will increase the number of companies who currently report as SRC’s (Smaller Reporting Companies). The reform is made with an intent to amplify investor protection while dwarfing compliance costs for these registrants.

According to the latest definition from the SEC, a company with less than $250 million of public float will now be considered an SRC. The new amendment, however, does not allow companies to automatically qualify as ‘non-accelerated’ filers. In addition, companies with an annual revenue of less than $100 million with either no public float or a public float of less than $700 million also qualify to be added to the professed list. Below is the contrast table between previous and current reforms.

Benchmark Previous criteria Revised criteria
Public Float Less than $75m public float Less than $250m public float
Revenues Annual revenue of less than $50m and no public float Annual revenue of less than $100m, with

  • no public float, or
  • public float of less than $700m

Source: www.sec.gov

The aforementioned criteria may also facilitate smaller reporting companies to prepare scaled disclosure accommodations under Regulation S-K and Regulation S-X, says the SEC.

“Expanding the smaller reporting company definition recognizes that a one-size regulatory structure for public companies does not fit all,” said Jay Clayton, Chairman of the SEC. “These amendments to the existing SRC compliance structure bring that structure more in line with the size and scope of smaller companies while maintaining our long-standing approach to investor protection in our public capital markets.” This indeed will open up more investment opportunities for the main street investors too, the Chairman believes.

According to the SEC, the amendments will come into effect 60 days after being published in the Federal Register.

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