In a move intended to carry out Securities and Exchange Commission (SEC) Chairman Paul Atkins’ agenda to “Make IPOs Great Again,” the agency proposed rule changes that would exempt many more public companies from the requirements under Section 404(b) of the Sarbanes-Oxley Act of 2002 to obtain an auditor’s attestation on management’s assessment of internal control over financial reporting (ICFR).
The SEC proposal would require only large accelerated filers to remain subject to Section 404(b). Moreover, the commission is proposing to raise the threshold for large accelerated filer status from the current $700 million to $2 billion public float, based on the average stock price over the last 10 trading days of the second fiscal quarter. The proposal would require that threshold to be met for two consecutive years and would require at least 60 consecutive calendar months of reporting before a company becomes a large accelerated filer.
This comes as business groups such as the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association (SIFMA), and Biopharma Innovation Organization (BIO) have repeatedly pointed to Section 404(b) as one of the most burdensome requirements which they believe do not provide commensurate benefits to investors.
They have often said that the decline in the number of initial public offerings (IPOs) compared to the 1990s is partly a result of unnecessary regulation.
On the other hand, investor protection advocates believe that effective controls over financial reporting instill greater investor confidence in a company’s results. They do not believe more classes of companies should be exempted. This requirement was created because companies like Enron and WorldCom cooked its books, and their investors suffered massive losses when they collapsed.
However, over the years, business lobbies have successfully persuaded the SEC to roll back auditor attestation of ICFR.
This was just one of several simplified reporting requirements proposed on May 19, 2026, aimed at promoting capital formation.
Today public companies that are classified as nonaccelerated filers, smaller reporting companies (SRCs), and emerging growth companies (EGCs) are exempt from Section 404(b).
Nonaccelerated filers have less than $75 million in common equity. SRCs have a public float of less than $250 million or have less than $100 million in revenues and have no public float or public float of less than $700 million. A company qualifies as an EGC—created by the JOBS Act—if it has total revenues of less than $1.235 billion. A company continues to be an EGC for the first five fiscal years after it completes an IPO, unless its total annual gross revenues are $1.235 billion or more, has issued more than $1 billion in non-convertible debt in the past three years, or becomes a large accelerated filer.
Under the proposal, companies that are not large accelerated filers would be categorized as non-accelerated filers, eliminating the accelerated filer and SRC categories.
The SEC proposes to extend to all non-accelerated filers the same disclosure scaling and other accommodations currently available to SRCs and EGCs, including say-on-pay or say-when-on-pay shareholder advisory votes, scaled executive compensation disclosure, and fewer years of financial statements.
A new sub-category of small non-accelerated filers—companies with total assets of $35 million or less for the two most recent years—would have an additional 30 days to file Form 10-K annual reports and an additional five days to file Form 10-Q quarterly reports.
If the proposed amendments were in place today, 19.2% of current public companies would be large accelerated filers—compared to 35.4% today, and 80.8% would be non-accelerated filers, the SEC said. About 17.9% of public companies would be classified as small non-accelerated filers.
The proposal is in Release No. 33-11419, Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies.
Registered Offering Reform
The SEC issued the reporting proposal alongside a separate registered offering reform proposal in Release No. 33-11418, Registered Offering Reform.
This proposal, if adopted, would be “the most significant modernization” of the registered offering framework in more than 20 years, the SEC said.
The proposal would:
- Revise Form S-3’s eligibility criteria to allow more public companies to conduct shelf offerings, enabling quicker access to public capital markets.
- Extend registration and offering communication flexibilities, many of which currently are reserved only for well-known seasoned issuers (WKSIs), to a broader set of issuers.
- Preempt state securities law registration and qualification requirements for all registered offerings.
- Maintain parity between certain Form N-2 filers and operating companies across registration, offering, and communication provisions.
- Expand access to broad-based advertising for certain insurance products.
- Modernize Form S-1 by expanding the ability to incorporate information by reference into that form.
The proposal could increase by more than 200% the number of issuers eligible for all enhanced registration and benefits, according to Release No. 33-11481.
Together, the two proposals intend to make it easier for public companies to raise capital in registered offerings and to reduce reporting requirements for many public companies.
In a statement, SEC Chairman Atkins said the two proposals are part of a broader agenda.
“Today’s Filer Status Proposal and Registered Offering Reform Proposal are just the beginning and will work in tandem to lay the groundwork for the of my Make IPOs Great Again agenda,” Atkins said. “Future proposals to transform the public company regulatory framework, including reforming the Regulation S-K disclosure requirements with materiality as its north star, will build on the foundation laid by today’s proposals.”
Reactions
“The proposed rules are quite robust, and would likely benefit most issuers, from the very small to the very large,” said Ro Sokhi, a partner with professional services firm UHY LLP.
“The mega blockbuster IPOs that are anticipated such as SpaceX, OpenAI and Anthropic would all benefit from the proposed rules if adopted,” he said. “These companies would generally qualify as large accelerated filers, requiring auditor attestations on internal controls by their second annual filings, which can be quite costly. Under the proposed rules, they would not be required for 60 months after the IPO.”
However, Sokhi added: “While certainly issuer-friendly, it’ll be interesting to watch if these proposed rules would be investor-friendly as well.”
Better Markets does not believe it is investor-friendly, saying the SEC is continuing its “assault on investors” in reference to another proposal in early May that would give companies the option to report semiannually.
“Under the guise of modernizing its framework for registered securities offerings, the SEC proposes to allow public companies to provide investors with less information,” said Benjamin Schiffrin, director of securities policy for Better Markets. “Yet the SEC itself recognizes that the purpose of the federal securities laws is to protect investors by requiring ‘full and fair disclosure’ in public markets, and it is this transparency that has made our public markets the envy of the world.”
Schiffrin pointed out that the SEC recognizes that its proposed rule changes could lead to “issuer behavior that results in harm to investors.” But the SEC is pursuing these changes to increase the number of public offerings.
“The SEC believes that the current rules governing public offerings prompt some issuers ‘to raise capital through other means, such as an exempt offering or private financing,'” he said. “As we have said previously, however, the reason companies choose to stay private today is because the SEC has expanded the private markets to the point that companies can raise as much money as they need without accessing the public markets. It is the expansion of the private markets that has led to companies shunning public offerings, and it is this expansion that the SEC does not address in today’s proposals.”
“Indeed, the SEC says that ‘the regulatory burdens and costs of being a public company’ are among the factors ‘influencing companies that might previously have gone public to remain private.’ Yet studies show that regulatory costs are not the reason for the recent decline in the number of initial public offerings. Rather, it is the ‘growing availability of private funding.’
“Chair Atkins says today’s rules are part of his plan to Make IPOs Great Again. He cannot do that without curbing the private offering exemptions that allow companies to raise unlimited sums privately. In the absence of such reforms, all today’s proposals will do is allow public companies to provide less information to the public, thus endangering investors.”
Comments on both proposals are due 60 days after publication in the Federal Register.
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