Last week, the SEC released a seismic proposal under which it proposes to simplify the filer status categories and expand accommodations to simplify disclosure for many companies. In its proposal, the SEC estimates that approximately 80% of current public companies would be eligible for the less burdensome disclosure requirements – with that group of companies representing less than 7% of the market’s total public float.
This group of companies would receive a non-accelerated filer (NAF) designation that would provide significant scaled disclosure accommodations, matching much of what is currently available to smaller reporting companies (SRCs) and emerging growth companies (EGCs). Under the proposal, NAFs would receive all the accommodations currently available to SRCs – along with some of the EGC accommodations.
Any company below the proposed $2 billion large accelerated filer (LAF) public float threshold would be an NAF – and newly public companies would remain NAFs for at least five years after their IPO regardless of the size of their public float.
Some of these proposed changes are truly momentous, including these executive pay-related ones:
- No mandate to hold say-on-pay or say-on-frequency advisory votes
- No mandate to include CD&A (or Compensation Committee Reports), pay ratio or pay-versus-performance disclosures
- Only three NEOs must be addressed in the pay tables
- Only two years of data required for the Summary Compensation Table
- No mandate to conduct an independence assessment before hiring compensation consultants
We should still expect a proposal from the SEC in the near future that directly reworks Item 402.
We are all just starting to process this proposal – and it will be interesting to see how investors and other stakeholders react to it. And if the proposal is adopted as proposed, it will be interesting to see how many companies voluntarily keep all – or some – of the disclosures they have been making since the various Dodd-Frank rules were adopted. More to come…
