Securities & Corporate Governance - SEC Eliminates Reg S-B and Expands Availability of Scaled Disclosure
On November 15, the SEC adopted new rules eliminating Reg S-B and substantially expanding the availability of scaled disclosure. As noted in its
press release, these amendments will be effective in December 2008 (30 days after publication in the Federal Register). The SEC release concerning the rule amendments has not yet been disseminated by the SEC.
The most significant changes are as follows:
- replacing the current "small business issuer" category with a new expanded category of "smaller reporting companies" having less than $75 million in public equity float or, if a company does not have a calculable
public equity float, having revenues of less than $50 million in the last fiscal year;
- expanding eligibility for the Commission's scaled disclosure and reporting requirements for smaller companies by allowing the newly defined category of smaller reporting companies to use the scaled disclosure requirements –
allowing “smaller reporting companies” to avoid preparing executive compensation discussion and analysis (CD&A) and the requirements of Reg S-X, among other things;
- eliminating Reg S-B and moving its scaled disclosure requirements into Reg S-K;
- amending the scaled disclosure requirements to require two years of balance sheet data instead of one year;
- permitting smaller reporting companies to elect to comply with scaled financial disclosure and non-financial disclosure on an item-by-item or "a la carte" basis;
- eliminating the SB forms (with a phase-out period for current small business issuers transitioning to smaller reporting company status); and
- permitting foreign companies to qualify as "smaller reporting companies" if they choose to file on domestic company forms and provide financial statements prepared in accordance with U.S. GAAP.