[Federal Register: September 29, 2005 (Volume 70, Number 188)]
[Proposed Rules]
[Page 56862-56877]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29se05-19]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210, 229, 240 and 249
[Release Nos. 33-8617; 34-52491; File No. S7-08-05]
RIN 3235-AJ29
Revisions to Accelerated Filer Definition and Accelerated
Deadlines for Filing Periodic Reports
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: We are proposing to modify the periodic report filing
deadlines so that only the largest accelerated filers (those with a
market value of outstanding voting and non-voting common equity held by
non-affiliates of $700 million or more) become subject to the final
phase-in of the accelerated filing transition schedule that will
require annual reports on Form 10-K to be filed within 60 days after
fiscal year end. Under our proposed amendments, however, these
companies would continue to file their quarterly reports on Form 10-Q
under the current 40-day deadline, rather than the 35-day deadline that
was scheduled to apply to quarterly reports filed next year. Other
accelerated filers would continue to file both their annual and
quarterly reports under current deadlines--75 days after fiscal year
end for annual reports on Form 10-K and 40 days after quarter end for
quarterly reports on Form 10-Q. We also are proposing to revise the
definition of the term ``accelerated filer'' to permit an accelerated
filer that has voting and non-voting common equity held by non-
affiliates of less than $25 million to exit accelerated filer status
promptly and begin filing its annual and quarterly reports on a non-
accelerated filer basis. Finally, the proposed amendments would permit
a large accelerated filer that has voting and non-voting common equity
held by non-affiliates of less than $75 million to promptly exit large
accelerated filer status.
DATES: Comments should be received on or before October 31, 2005.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form http://www.sec.gov/rules/proposed.shtml.
; or Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-08-05 on the subject line; or
Use the Federal eRulemaking Portal (http://www.regulations.gov
). Follow the instructions for submitting comments.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549-9303.
All submissions should refer to File Number S7-08-05. This file
number should be included on the subject line if e-mail is used. To
help us process and review your comments more efficiently, please use
only one method. The Commission will post all comments on the
Commission's Internet Web site (http://www.sec.gov/rules/proposed.shtml
). Comments will also be available for public inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE, Washington, DC 20549. All comments received will be posted without
change; we do not edit personal identifying information from
submissions. You
[[Page 56863]]
should submit only information that you wish to make available
publicly.
FOR FURTHER INFORMATION CONTACT: Katherine W. Hsu, Special Counsel,
Office of Rulemaking, at (202) 551-3430, Division of Corporation
Finance, U.S. Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549-3628.
SUPPLEMENTARY INFORMATION: We are proposing amendments to Rules 3-
01,\1\ 3-09 \2\ and 3-12 \3\ of Regulation S-X,\4\ Item 101 \5\ of
Regulation S-K,\6\ Forms 10-Q, 10-K and 20-F \7\ under the Securities
Exchange Act of 1934 (``Exchange Act'') \8\ and Exchange Act Rules 12b-
2,\9\ 13a-10 \10\ and 15d-10.\11\
---------------------------------------------------------------------------
\1\ 17 CFR 210.3-01.
\2\ 17 CFR 210.3-09.
\3\ 17 CFR 210.3-12.
\4\ 17 CFR 210.1-01 et seq.
\5\ 17 CFR 229.101.
\6\ 17 CFR 229.10 et seq.
\7\ 17 CFR 249.308a; 17 CFR 249.310; and 17 CFR 249.220f.
\8\ 15 U.S.C. 78a et seq.
\9\ 17 CFR 240.12b-2.
\10\ 17 CFR 240.13a-10.
\11\ 17 CFR 240.15d-10.
---------------------------------------------------------------------------
I. Background
A. Initial Adoption of Accelerated Filing Requirements
On September 5, 2002, we adopted new rules requiring larger public
companies filing annual reports on Form 10-K and quarterly reports on
Form 10-Q to file these reports on an accelerated basis.\12\ We adopted
the accelerated filing requirements as part of a series of steps to
modernize and improve the usefulness of the periodic reporting system.
The term ``accelerated filer,'' which is used to describe these
issuers, is defined in Exchange Act Rule 12b-2 and applies to an issuer
once it first meets all of the following conditions as of the end of
its fiscal year:
---------------------------------------------------------------------------
\12\ See Release No. 33-8128 (Sept. 5, 2002) [67 FR 58480].
---------------------------------------------------------------------------
The issuer has an aggregate market value of voting and
non-voting common equity held by non-affiliates of the issuer (referred
to as ``public float'') of $75 million or more,\13\ as of the last
business day of the issuer's most recently completed second fiscal
quarter;\14\
---------------------------------------------------------------------------
\13\ The $75 million public float threshold in the accelerated
filer definition, though not the date of determination, is the same
as the public float eligibility requirement for registration of a
primary offering for cash on Form S-3 or Form F-3.
\14\ For purposes of the accelerated filer definition, the
issuer must compute the aggregate market value of its outstanding
voting and non-voting common equity by use of the price at which the
common equity was last sold, or the average of the bid and asked
prices of such common equity, in the principal market for such
common equity, as of the last business day of its most recently
completed second fiscal quarter.
---------------------------------------------------------------------------
The issuer has been subject to the reporting requirements
of Section 13(a) or 15(d) of the Exchange Act \15\ for a period of at
least 12 calendar months;
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78m(a) or 78o(d).
---------------------------------------------------------------------------
The issuer previously has filed at least one annual
report; and
The issuer is not eligible to use Forms 10-KSB \16\ and
10-QSB \17\ for its annual and quarterly reports.
---------------------------------------------------------------------------
\16\ 17 CFR 249.310b.
\17\ 17 CFR 249.308b.
---------------------------------------------------------------------------
The definition of an accelerated filer also contains specific
requirements concerning the entry into, and exit from, accelerated
filer status. These requirements provide that the determination of
whether a non-accelerated filer becomes an accelerated filer as of the
end of its fiscal year governs the filing deadlines for the annual
report on Form 10-K to be filed for that fiscal year, for the quarterly
reports on Form 10-Q to be filed for the subsequent fiscal year and for
all such annual and quarterly reports to be filed thereafter.\18\
Currently, once a company becomes an accelerated filer, it remains an
accelerated filer unless and until it subsequently becomes eligible to
use Forms 10-KSB and 10-QSB for its annual and quarterly reports.\19\
---------------------------------------------------------------------------
\18\ While the accelerated filer definition does not by its
terms exclude foreign private issuers, to date, the filing deadlines
for accelerated filers have had application only with respect to
foreign private issuers that file annual reports on Form 10-K and
quarterly reports on Form 10-Q. In another action that the
Commission takes today to defer the compliance date for our rules
implementing application of Section 404 of the Sarbanes-Oxley Act of
2002 [15 U.S.C. 7262] for an additional year for certain issuers,
until fiscal years commencing on or after July 15, 2007, the
deferral would extend to foreign private issuers that are not
accelerated filers.
\19\ See Exchange Act Rule 12b-2. See also Item 10(a)(2) of
Regulation S-B [17 CFR 228.10(a)(2)] for the conditions for entering
and exiting the small business reporting system. A reporting company
that is not a small business issuer must meet the definition of a
small business issuer at the end of two consecutive fiscal years
before it becomes eligible to file Forms 10-KSB and 10-QSB. The term
``small business issuer'' is defined in Rule 12b-2 as a U.S. or
Canadian issuer that is not an investment company and that has less
than $25 million in revenues and public float. If the issuer is a
majority-owned subsidiary, it meets the definition of a small
business issuer only if the parent corporation is also a small
business issuer.
---------------------------------------------------------------------------
We originally determined to phase-in the accelerated filing
deadlines over a three-year period in an effort to balance the market's
demand for more timely information with the time that issuers need to
prepare accurate information without undue burden.\20\ In the
accelerated filer adopting release, we anticipated that a gradual
transition period would allow issuers to adjust their reporting
schedules and develop efficiencies to ensure that the quality and
accuracy of their reported information would not be compromised.\21\
---------------------------------------------------------------------------
\20\ See Release No. 33-8128.
\21\ Id.
---------------------------------------------------------------------------
Year one of the phase-in period began for accelerated filers with
fiscal years ending on or after December 15, 2002. During year one, the
Form 10-K annual report deadline remained at 90 days after fiscal year
end, and the Form 10-Q quarterly report deadline remained at 45 days
after quarter end, but accelerated filers became subject to new
disclosure requirements concerning Web site access to their Exchange
Act reports.\22\ In year two, the deadline for annual reports on Form
10-K filed for fiscal years ending on or after December 15, 2003 was
accelerated to 75 days and the deadline for the three subsequently
filed quarterly reports on Form 10-Q was accelerated to 40 days.
---------------------------------------------------------------------------
\22\ Id. Accelerated filers are required to disclose in their
annual reports where investors can obtain access to their filings,
including whether the company provides access to its Form 10-K, 10-Q
and 8-K reports on its Internet Web site, free of charge, as soon as
reasonably practicable after those reports are electronically filed
with, or furnished to, the Commission. See Item 101(e)(4) of
Regulation S-K [17 CFR 229.101(e)(4)].
---------------------------------------------------------------------------
In year three, the Form 10-K annual report deadline was to become
further accelerated to 60 days for reports filed for fiscal years
ending on or after December 15, 2004, and the deadline for the three
subsequently filed quarterly reports on Form 10-Q was to accelerate to
35 days. This would have completed the phase-in for all accelerated
filers, with the 60-day and 35-day deadlines remaining in place for
Form 10-K and Form 10-Q, respectively, for all subsequent periods.
B. One-Year Postponement of the Final Phase-In Period for the
Accelerated Periodic Report Deadlines
However, in year two of the phase-in period, several issuers and
auditors expressed concern over their ability to perform the work
necessary to file reports timely and, in particular, to comply with the
Commission's new internal control over financial reporting requirements
\23\ mandated by Section 404 of the Sarbanes-Oxley Act of 2002 at the
same time that periodic report deadlines were scheduled to be further
accelerated.\24\ The Commission acted in response to the concerns
voiced by issuers and auditors by providing
[[Page 56864]]
additional time and opportunity for accelerated filers and their
auditors to focus on complying with the new internal control reporting
requirements. First, in February 2004, we extended the Section 404 rule
compliance dates so that an accelerated filer had to begin complying
with the internal control reporting requirements for its first fiscal
year ending on or after November 15, 2004, rather than its first fiscal
year ending on or after June 15, 2004.\25\
---------------------------------------------------------------------------
\23\ See Exchange Act Rules 13a-15 and 15d-15 [17 CFR 240.13a-15
and 15d-15] and Item 308 of Regulations S-K and S-B [17 CFR 229.308
and 228.308], as adopted in Release No. 33-8238 (June 5, 2003) [68
FR 36636].
\24\ See note 18 in Release No. 33-8477 (Aug. 25, 2004) [69 FR
53550].
\25\ Release No. 33-8392 (Feb. 24, 2004) [69 FR 9722].
---------------------------------------------------------------------------
In November 2004, we postponed for one year the final phase-in
period for acceleration of the annual and quarterly report filing
deadlines on Forms 10-K and 10-Q. The amendments permitted an
accelerated filer's annual report on Form 10-K for a fiscal year ending
on or after December 15, 2004, but before December 15, 2005, to be
filed within 75 days, rather than 60 days, after fiscal year end and
the three subsequently filed quarterly reports on Form 10-Q to be filed
within 40 days, rather than 35 days, after the end of a fiscal quarter.
Under the amended accelerated phase-in schedule that currently governs
the periodic report filing deadlines, annual reports on Form 10-K filed
by accelerated filers for fiscal years ending on or after December 15,
2005 will be due within 60 days after fiscal year end and quarterly
reports on Form 10-Q will be due within 35 days after fiscal quarter
end, thereby completing the final phase-in period.
II. Discussion of Proposed Amendments
Based on various comments from issuers and auditors, and a recent
recommendation from the SEC Advisory Committee on Smaller Public
Companies regarding the accelerated filing deadlines,\26\ we are
proposing to amend the definition of accelerated filer and to further
amend the accelerated filing deadlines. We are proposing to amend the
accelerated filer rules to:
---------------------------------------------------------------------------
\26\ The Commission organized the Advisory Committee on March
23, 2005 to examine the impact of the Sarbanes-Oxley Act and other
federal securities laws on smaller public companies.
---------------------------------------------------------------------------
Create a new category of accelerated filer, the ``large
accelerated filer,'' for issuers with an aggregate worldwide \27\
market value of voting and non-voting common equity held by non-
affiliates of the issuer of $700 million or more, as of the last
business day of the issuer's most recently completed second fiscal
quarter; \28\
---------------------------------------------------------------------------
\27\ As discussed in Section II.D of this release, we are
proposing to modify the existing Rule 12b-2 definition of
``accelerated filer'' to refer to the company's ``aggregate
worldwide market value'' rather than ``aggregate market value.''
\28\ See paragraph 2 of the proposed Exchange Act Rule 12b-2
definition of ``accelerated filer and large accelerated filer.''
---------------------------------------------------------------------------
Amend the accelerated filing deadlines so that the 60-day
Form 10-K annual report deadline would apply only to the proposed new
large accelerated filers. The Form 10-Q quarterly report filing
deadline for large accelerated filers would remain at 40 days with no
further reduction provided in our rules. Periodic report deadlines for
other accelerated filers would remain at 75 days for annual reports on
Form 10-K and 40 days for quarterly reports on Form 10-Q, again with no
further reduction provided in our rules; \29\
---------------------------------------------------------------------------
\29\ See proposed amendments to Exchange Act Forms 10-K [17 CFR
249.310] and 10-Q [17 CFR 249.308a].
---------------------------------------------------------------------------
Allow an accelerated filer with less than a $25 million
aggregate worldwide market value of voting and non-voting common equity
held by non-affiliates of the issuer, as of the last business day of
the issuer's most recently completed second fiscal quarter, to exit
accelerated filer status without a second year's determination or other
delay; \30\ and
---------------------------------------------------------------------------
\30\ See paragraph 3(ii) of the proposed Exchange Act Rule 12b-2
definition of ``accelerated filer and large accelerated filer.''
---------------------------------------------------------------------------
Allow a large accelerated filer with less than a $75
million aggregate worldwide market value of voting and non-voting
common equity held by non-affiliates of the issuer, as of the last
business day of the issuer's most recently completed second fiscal
quarter, to exit large accelerated filer status.\31\
---------------------------------------------------------------------------
\31\ See paragraph 3(iii) of the proposed Exchange Act Rule 12b-
2 definition of ``accelerated filer and large accelerated filer.''
We believe that the proposed deadlines would strike the appropriate
balance between the timeliness and accessibility of Exchange Act
reports to investors and to the financial markets and the need of
companies and their auditors to conduct, without undue cost, high-
quality and thorough assessments and audits of the financial statements
contained in the reports.
The deadline for filing an annual report on Form 20-F has not been
accelerated and we are not proposing to do so in this release. However,
the current definition of accelerated filer and the proposed
definitions of accelerated filer and large accelerated filer do not
exclude companies that qualify as foreign private issuers. As a result,
a foreign private issuer that voluntarily files on Forms 10-K and 10-Q
is required to determine whether it is an accelerated filer or large
accelerated filer and, if so, must comply with the applicable
deadlines. A foreign private issuer that loses its status as such and
is therefore required to file reports on Forms 10-K and 10-Q must do
likewise.
A. Large Accelerated Filers
We are proposing amendments to the Exchange Act Rule 12b-2
definition of ``accelerated filer'' to create a new category of
accelerated filers to be designated as ``large accelerated filers.''
\32\ Under the proposed amendments, an issuer would become a large
accelerated filer once it meets the following conditions for the first
time at its fiscal year end:
---------------------------------------------------------------------------
\32\ See paragraph 2 of the proposed Exchange Act Rule 12b-2 of
``accelerated filer and large accelerated filer.''
---------------------------------------------------------------------------
The issuer had an aggregate worldwide market value of
voting and non-voting common equity held by its non-affiliates of $700
million or more, as of the last business day of the issuer's most
recently completed second fiscal quarter; \33\
---------------------------------------------------------------------------
\33\ As a related change, we propose to re-define an accelerated
filer as an issuer with an aggregate market value of voting and non-
voting common equity held by non-affiliates of $75 million or more
and less than $700 million. See paragraph (1)(i) of the proposed
Exchange Act Rule 12b-2 definition of ``accelerated filer and large
accelerated filer.''
---------------------------------------------------------------------------
The issuer has been subject to the reporting requirements
of Exchange Act Section 13(a) or 15(d) for a period of at least 12
calendar months;
The issuer has filed at least one annual report pursuant
to Section 13(a) or 15(d); and
The issuer is not eligible to use Forms 10-KSB and 10-QSB
for its annual and quarterly reports.
The proposed $700 million public float threshold in the large
accelerated filer definition, though not the time of determination, is
the same as the public float eligibility requirement that we used in
our recently adopted Securities Offering Reform final rules \34\ to
establish a new category of issuer defined as a ``well-known seasoned
issuer.'' \35\
---------------------------------------------------------------------------
\34\ Release No. 33-8591 (July 19, 2005) [70 FR 44722].
\35\ In addition to having different dates of determination, the
``large accelerated filer'' and ``well-known seasoned issuer''
definitions are different in other respects. In particular,
Securities Act Rule 405 [17 CFR 230.405] defines a well-known
seasoned issuer as one that meets the following requirements:
the registrant requirements of Form S-3 [17 CFR 239.13]
or F-3 [17 CFR 239.33];
the issuer either must have outstanding a worldwide
market value of its outstanding voting and non-voting common equity
held by non-affiliates of $700 million or more, or must have issued
at least $1 billion aggregate principal amount of non-convertible
securities, other than common equity, in registered offerings during
the past three years and register only non-convertible securities;
and
---------------------------------------------------------------------------
[[Page 56865]]
the issuer cannot be a registered investment company,
asset-backed issuer or a type of issuer that falls within the Rule
405 definition of an ``ineligible issuer.''
As a result, for example, some debt-only issuers may become
well-known seasoned issuers while only issuers that have registered
a class of equity security under Section 12 of the Exchange Act
could become subject to the large accelerated filer definition. In
addition, there could be some large accelerated filers that are
ineligible issuers and therefore cannot become well-known seasoned
issuers. For example, a large accelerated filer that is not current
with respect to its periodic report filing obligations, or that was
a blank check, shell company (other than a business combination
related shell company) or an issuer of penny stock as defined in
Exchange Act Rule 3a51-1 during the three years before the
determination date specified in the ineligible issuer definition,
would not be eligible to become a well-known seasoned issuer.
---------------------------------------------------------------------------
We believe that Exchange Act reporting companies with a public
float of $700 million or more are more closely followed by the markets
and securities analysts than other issuers. They accounted for
approximately 95% of U.S. equity market capitalization in 2004.\36\ By
virtue of their size, the proposed large accelerated filers also are
more likely than smaller companies to have a well-developed
infrastructure and financial reporting resources to support further
acceleration of the annual report deadline.\37\ Under the proposed
amendments, large accelerated filers would become subject to Form 10-K
annual report deadlines that are more accelerated than the deadlines
that would apply to all other filers, as explained in Section II.B.
below.
---------------------------------------------------------------------------
\36\ See the discussion in Section II.A.1 in Release No. 33-
8591. We previously used the $700 million cut-off as the threshold
differentiating the largest companies with the most active market
following in our order granting an exemption under Section 36 of the
Exchange Act [15 U.S.C. 78mm(a)] to accelerated filers with less
than $700 million from filing their management's annual report on
internal control over financial reporting and the related
attestation report of the registered public accounting firm and
providing them an additional 45 days to timely file. Release No. 34-
50754 (Nov. 30, 2004) [69 FR 70291].
\37\ See, e.g., letters from the American Institute of Certified
Public Accountants, BDO Seidman LLP, Ernst & Young LLP, and KPMG LLP
in response to Release No. 33-8501.
---------------------------------------------------------------------------
Currently, every company filing annual reports on Form 10-K and
quarterly reports on Form 10-Q is required to check a box on the cover
page of these reports to indicate whether or not it is an accelerated
filer. As a conforming amendment, we propose to add a new check box to
the cover page of Forms 10-K, 10-Q and 20-F so that a reporting company
can indicate on these forms whether it is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. We also are proposing a
conforming amendment to Item 101(c) of Regulation S-K which requires
accelerated filers to disclose in their annual reports where investors
can obtain access to their filings, including whether the company
provides access to its Forms 10-K, 10-Q and 8-K reports on its Internet
Web site, free of charge. The proposed amendment to this item
references both accelerated filers and large accelerated filers.
Request for Comment
Is it appropriate to create a new category of accelerated
filers known as ``large accelerated filers?'' Should we modify the
proposed definition of ``large accelerated filer'' in any way?
Are differences between the Securities Act Rule 405
definition of ``well-known seasoned issuer'' and the proposed Exchange
Act Rule 12b-2 definition of ``large accelerated filer'' appropriate?
Would any problems be created by differences between the two
definitions?
As proposed, an issuer would determine whether it must
enter large accelerated filer status based on the aggregate worldwide
market value of its outstanding voting and non-voting common equity as
of the last business day of the issuer's most recently completed second
fiscal quarter. Is it appropriate to tie the determination of large
accelerated filer status and accelerated filer status to the last
business day of the issuer's most recently completed second fiscal
quarter? Should the determination be made over a longer period of time?
B. Proposed Amendments to the Accelerated Filing Deadlines
Under the current phase-in schedule and absent today's proposed
amendments, all accelerated filers would become subject to the final
phase-in period that requires annual reports on Form 10-K for fiscal
years ending on or after December 15, 2005 to be filed within 60 days
after fiscal year end and subsequently filed quarterly reports on Form
10-Q to be filed within 35 days after quarter end. After evaluating the
discussions and comments provided at the Commission's roundtable on
internal control over financial reporting,\38\ and public comments on
our initial accelerated filer release,\39\ temporary postponement
release \40\ and securities offering reform release,\41\ we are
proposing to maintain the accelerated filing deadlines at the current
75 days for annual reports on Form 10-K for accelerated filers that are
not large accelerated filers and to maintain the accelerated filer
deadlines for all accelerated filers at the current 40 days for
quarterly reports on Form 10-Q. While we are mindful of the incremental
benefit that more timely accessibility to periodic reports would
provide to investors, we believe that the burdens associated with an
increased acceleration of the deadlines justify our proposal to subject
only certain companies to the further acceleration. This proposal also
is consistent with a recommendation adopted on August 10, 2005 by the
SEC Advisory Committee on Smaller Public Companies that smaller public
companies not be subject to any further acceleration of due dates for
annual and quarterly reports.\42\ If the
[[Page 56866]]
proposed deadlines are adopted, we intend to begin applying the revised
deadlines with respect to Form 10-K annual reports for fiscal years
ending on or after December 15, 2005.
---------------------------------------------------------------------------
\38\ See SEC Press Release Nos. 2005-20 (Feb. 22, 2005) and
2005-50 (Apr. 7, 2005). The roundtable was held April 13, 2005. See,
e.g., testimony from Bob Miles of Washington Mutual and letters from
Ernst & Young LLP April 4, 2005, Glass Lewis & Co. April 12, 2005
and Crowe Chizek and Company LLC, March 28, 2005. Materials related
to the roundtable, including an archived broadcast of the roundtable
are available on-line at http://www.sec.gov/spotlight/soxcomp.htm.
\39\ See, e.g., letters from the American Institute of Certified
Public Accountants, American Bankers Association, Arris Group, Inc.,
Baldwin & Lyons, Inc., Berry, Dunn, McNeil & Parker, R.G.
Associates, Inc., Ernst & Young LLP, HealthSouth Corporation, Jones
& Keller, P.C., KPMG LLP, Helen W. Melman, National Association of
Real Estate Companies, New York State Bar Association, Perkins Coie
LLP, Thacher Profitt & Wood, Triarc Companies, Inc., and Troutman
Sanders LLP in response to Release No. 33-8089 (Apr. 12, 2002) [67
FR 19896].
\40\ See, e.g., letters from the American Institute of Certified
Public Accountants, Becker & Poliakoff, P.A., BDO Seidman, LLP, The
Chubb Corporation, Deloitte & Touche LLP, Ernst & Young LLP, First
Federal Bancshares of Arkansas, Federal Signal Corporation, Franklin
Financial Services Corporation, MBNA Corporation, Pfizer Inc.,
Protective Life Corporation, and Spectrum Organic Products in
response to Release No. 33-8477 (Aug. 25, 2004) [69 FR 67392].
\41\ See, e.g., letters from the American Institute of Certified
Public Accountants, BDO Seidman LLP, Ernst & Young LLP, and KPMG LLP
in response to Release No. 33-8501.
\42\ The Advisory Committee advocated that in implementing this
recommendation, the Commission look to the Committee's guidance in
defining ``smaller public company.'' Materials related to the August
10, 2005 meeting held by the Commission's Advisory Committee on
Smaller Public Companies are available on-line at http://www.sec.gov/info/smallbus/acspc.shtml.
The Advisory Committee also
recommended deferring compliance with the internal control over
financial reporting requirements by companies that are not
accelerated filers.
---------------------------------------------------------------------------
We continue to believe that the public float test is an appropriate
measure of size and market interest, and that there is a significant
difference between companies with a public float of $700 million or
more and other public companies.\43\ Based on the public comments that
we have received and our staff's analysis of the available data in
connection with the Securities Offering Reform, we believe other
accelerated filers with a public float below $700 million generally are
not followed as closely by investors and analysts and have fewer
resources to devote to regulatory compliance and financial reporting.
We note, however, that most accelerated filers have been able to meet
the current accelerated deadlines, although we are aware of the
additional cost that meeting these deadlines has imposed on companies.
In order to provide reporting companies with a public float between $75
million and $700 million with adequate time to prepare accurate and
complete reports without imposing undue burden and expense, we propose
to maintain the Form 10-K annual report deadline at 75 days after
fiscal year end and the Form 10-Q quarterly report deadline at 40 days
after the quarter end for these companies.
---------------------------------------------------------------------------
\43\ According to the Office of Economic Analysis, in the period
from 1997 to 2004, issuers with a market capitalization in excess of
$700 million that conducted offerings typically had an average of 12
analysts following them prior to the offering and issuers with a
market capitalization of between $75 million and $200 million, in
most cases, have between zero to five analysts following them with
approximately 50% having zero to two analysts following them.
Further analysis showed that issuers with a market capitalization in
excess of $700 million had significantly higher average daily
trading volumes. In addition, the data shows that issuers with a
market capitalization in excess of $700 million accounted for over
90% of the proceeds from securities offerings over that period.
---------------------------------------------------------------------------
The proposed amendments also would allow large accelerated filers
to continue filing their quarterly reports on Form 10-Q within 40 days
after quarter end. Based on comments that we have received indicating
that most accelerated filers find it significantly more difficult to
comply with the accelerated quarterly report deadline than with the
accelerated annual report deadline,\44\ we propose to maintain the Form
10-Q quarterly report deadline at 40 days even for large accelerated
filers. We are also proposing technical corrections to the codification
of financial reporting policies to reflect these amendments.
---------------------------------------------------------------------------
\44\ See, e.g., letters from The Committee on Corporate
Reporting of Financial Executives International (July 20, 2005) and
Stewart Information Services Corp (June 23, 2005).
---------------------------------------------------------------------------
Therefore, the proposed periodic report filing deadlines would
relate to the following three separate tiers of issuers and be of
different lengths depending on the type of issuer:
Large accelerated filers would be required to file their
annual reports on Form 10-K within 60 days after the end of the fiscal
year and quarterly reports on Form 10-Q within 40 days after the end of
the fiscal quarter;
Accelerated filers that are not large accelerated filers
would be required to file their annual reports on Form 10-K within 75
days after the end of the fiscal year and quarterly reports on Form 10-
Q within 40 days after the end of the fiscal quarter; and
All issuers that are not accelerated filers would continue
to be required to file their annual reports on Form 10-K within 90 days
after the end of the fiscal year and quarterly reports on Form 10-Q
within 45 days after the end of the fiscal quarter.
The following table compares the periodic reporting deadlines under
the current rules with the deadlines under our proposed amendments:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Deadlines for reports beginning with Deadlines for reports beginning with
the annual report for fiscal year the annual report for fiscal year
ending on or after December 15, 2005 ending on or after December 15, 2005
Category of filer under the current rules Category of filer under the proposed rules
-------------------------------------- -------------------------------------
10-K Deadline 10-Q Deadline 10-K Deadline 10-Q Deadline
(days) (days) (days) (days)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Accelerated Filer ($75MM or more)........... 60 35 Large Accelerated Filer 60 40
($700MM or more).
Accelerated Filer (between 75 40
$75MM and $700MM).
Non-accelerated Filer (less than $75MM)..... 90 45 Non-accelerated Filer (less 90 45
than $75MM).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Request for Comment
Do the proposed three tiers of filing deadlines provide
appropriate balance and structure within the periodic reporting system?
Would an alternate structure for reporting deadlines be preferable? If
so, what criteria should we use to determine the appropriate deadlines?
Should we change any of the filing deadlines for any
category of issuer?
Would three tiers of filing deadlines cause confusion
among investors regarding the due dates for companies' periodic
reports? Is it necessary to distinguish large accelerated filers from
smaller accelerated filers if the only effect of the distinction is to
require large accelerated filers to file their annual reports 15 days
earlier than smaller accelerated filers? If there should be a uniform
set of deadlines that would apply to all accelerated filers, what
should those deadlines be?
Should we require large accelerated filers to file their
quarterly reports within 35 days after quarter end, consistent with the
deadline that is currently scheduled to be phased-in under existing
requirements?
Is it appropriate to maintain the current 75 and 40-day
filing deadlines for accelerated filers that are not large accelerated
filers? Do the current deadlines achieve our goal of providing detailed
reports to the public as quickly as possible without compromising the
reliability and accuracy of the reports?
Would deadlines for accelerated filers and non-accelerated
filers that are longer than the deadlines for large accelerated filers
unduly disadvantage investors in companies that are not large
accelerated filers?
C. Exiting Accelerated Filer and Large Accelerated Filer Status
We propose to amend the accelerated filer definition to allow an
issuer to exit accelerated filer status at the end of the
[[Page 56867]]
fiscal year if the issuer's aggregate market value of voting and non-
voting common equity held by non-affiliates of the issuer falls below
$25 million, as of the last day of the issuer's second fiscal quarter.
Under the current definition, an issuer that has become an accelerated
filer remains one unless and until the issuer becomes eligible to use
Forms 10-KSB and 10-QSB for its annual and quarterly reports.
Under requirements set forth in Item 10(a)(2) of Regulation S-B, a
reporting issuer that is not a small business issuer must meet the
small business issuer definition at the end of two consecutive years
before becoming eligible to use Forms 10-KSB and 10-QSB. The
determination made by a reporting company at the end of the second
consecutive fiscal year that it has become eligible to file on Forms
10-KSB and 10-QSB governs reports relating to the next fiscal year
only. This requires a reporting issuer that first meets the small
business issuer definition at the end of a fiscal year to wait two
years from that point before it can begin to file its annual report on
a non-accelerated filer basis.\45\
---------------------------------------------------------------------------
\45\ For example, if an issuer meets the definition of
accelerated filer at the end of its 2004 fiscal year, the issuer
will file its 2004 annual report on an accelerated filer basis.
However, in order to exit accelerated filer status, an accelerated
filer must meet the definition of small business issuer and file on
an accelerated filer basis at the end of its 2004 and 2005 fiscal
years before being allowed to file on a non-accelerated filer basis
beginning with its first quarter Form 10-QSB in fiscal 2006.
---------------------------------------------------------------------------
Thus, a previously reporting issuer will always enter the small
business reporting system with a quarterly report filed on Form 10-QSB
and must still file its annual report on Form 10-K for the fiscal year
in which it first met the small business definition.\46\ This differs
from the accelerated filer reporting system which requires new
accelerated filers to always enter the system with the filing of an
annual report rather than a quarterly report.
---------------------------------------------------------------------------
\46\ See Item 10(a)(2)(v) of Regulation S-B [17 CFR
228.10(a)(2)(v)].
---------------------------------------------------------------------------
In addition, there have been circumstances under the current
accelerated filer definition where a company that no longer has common
equity securities outstanding and therefore no longer has a duty to
file periodic reports with respect to these securities, but continues
to have a reporting obligation for another security, is required to
remain an accelerated filer for two years. While the instances in which
a company no longer would have publicly held common equity but still be
subject to an Exchange Act reporting obligation with respect to another
class of non-common equity security are likely to occur infrequently,
the circumstance may occasionally occur in connection with a stock
merger or leveraged buyout structured as a cash merger or
recapitalization.\47\ These companies remain subject to the requirement
to file their periodic reports on an accelerated filer basis despite
the fact that they would not have been required to initially become an
accelerated filer if they had only a class of debt securities
registered under the Exchange Act.
---------------------------------------------------------------------------
\47\ Based on data from the Center for Research in Securities
Prices Database obtained by the Office of Economic Analysis, we
estimate that 142 companies met the accelerated filer definition on
or after their fiscal years ended December 15, 2002 and then
subsequently delisted their common stock or other common equity from
a national securities exchange or Nasdaq during the 2003 calendar
year. Of the 142 companies, we estimate that only four companies
continued to have an Exchange Act reporting obligation with respect
to another class of debt or non-common equity securities. It is our
understanding that the data in CRSP does not include a complete list
of common equity traded through the OTC Bulletin Board or Pink
Sheets LLC, so our estimate may understate the actual number of
companies that would be affected by our proposed revision to the
accelerated filer definition.
---------------------------------------------------------------------------
In the initial accelerated filer adopting release, we expressed the
view that, once a company meets the accelerated filer threshold, it is
reasonable to minimize a company's fluctuation in and out of
accelerated filer status.\48\ We are proposing to allow an accelerated
filer to exit accelerated filer status promptly if the aggregate
worldwide market value of the voting and non-voting common equity held
by non-affiliates of the issuer has fallen to less than $25 million as
of the last business day of the issuer's most recently completed second
fiscal quarter.\49\ While the proposed amendments would permit
additional companies to exit accelerated filer status, our research
indicates that the proposed amendments would not significantly increase
fluctuations out of accelerated filer status.\50\
---------------------------------------------------------------------------
\48\ See Release No. 33-8128. Stability of status helps avoid
investor confusion and assures that issuers have sufficient notice
to prepare their periodic disclosure on a timely basis.
\49\ See paragraph 3(ii) of the proposed Exchange Act Rule 12b-2
definition of ``accelerated filer and large accelerated filer.''
\50\ Based on data from the Thomson Worldscope Global Database,
we estimate that only 25 companies had a public float of $75 million
in 2003, but less than $25 million in 2004.
---------------------------------------------------------------------------
Considering the substantial loss in public float required for an
accelerated filer to reach the $25 million threshold and the limited
following and reporting resources of a public issuer with less than $25
million in public float, we believe that it is appropriate to allow
these issuers to exit accelerated filer status promptly. The types of
companies that would benefit from this proposed relief also would
include those that no longer have any voting or non-voting common
equity held by non-affiliates but continue to be subject to the
reporting requirements of Exchange Act Section 13(a) or 15(d) with
respect to a class of securities that are not common equity
securities.\51\
---------------------------------------------------------------------------
\51\ The proposed amendment would allow reporting issuers that
have lost their public float to be treated similarly to other
Exchange Act reporting issuers that have never had a public float,
such as issuer of publicly held debt securities.
---------------------------------------------------------------------------
Under the proposed amendments, the issuer's determination that it
has less than $25 million in public float, as of the last business day
of the issuer's most recently completed second fiscal quarter would
permit it to file its annual report on a non-accelerated filer basis
for the fiscal year in which that determination is made. For example,
if a December 31, 2005 fiscal year-end accelerated filer had less than
$25 million in public float on June 30, 2005, the end of its second
fiscal quarter, it could exit accelerated filer status on December 31,
2005, and would not have to file its Form 10-K for fiscal year 2005 on
an accelerated filer basis. The issuer could then continue to file all
subsequent annual and quarterly reports on a non-accelerated filer
basis unless and until the issuer again meets the accelerated filer
definition.
The proposed amendments also permit large accelerated filers to
exit from large accelerated filer status. Once its public float has
fallen to less than $75 million, also as of the last business day of
the company's most recently completed second fiscal quarter, a large
accelerated filer could exit large accelerated filer status as of the
end of the fiscal year and file its annual report as an accelerated
filer or non-accelerated filer in the same year that the determination
of public float was made. If the company's public float was $25 million
or more, but less than $700 million, as of the last day of its second
fiscal quarter, the company would begin filing its reports as an
accelerated filer. If the company's public float was less than $25
million as of that date, it no longer would be required to file its
periodic reports on an accelerated basis.\52\ We have chosen the $75
million threshold for the exit of a large accelerated filer, as it
parallels the amount of public float that characterizes an accelerated
filer.
---------------------------------------------------------------------------
\52\ See paragraph (3)(iii) of the proposed Exchange Act Rule
12b-2 definition of ``accelerated filer and large accelerated
filer.''
---------------------------------------------------------------------------
Request for Comment
Should we revise the accelerated filer definition to allow
issuers that fall
[[Page 56868]]
below the $25 million public float threshold to exit accelerated filer
status, as proposed? Would the proposal adversely impact investor
protection in any material respect?
Is $25 million public float an appropriate threshold point
at which an accelerated filer should be permitted to exit accelerated
filer status? For example, should an accelerated filer instead be
permitted to exit when its public float drops below $50 million? If
not, what would be a more appropriate point and why?
Is $75 million public float an appropriate threshold point
at which a large accelerated filer should be permitted to exit large
accelerated filer status? Should a large accelerated filer instead be
allowed to exit when its public float has dropped to $250 million, $500
million, or some other threshold?
As proposed, an issuer would determine whether it can exit
accelerated filer status at the end of the fiscal year and for its
upcoming annual report based on the aggregate worldwide market value of
the issuer's outstanding voting and non-voting common equity as of the
last business day of the issuer's most recently completed second fiscal
quarter. Is this an appropriate date upon which to determine whether an
issuer should be able to exit accelerated filer status? Should the
determination instead be tied to the end of the fiscal year? Is tying
the determination to a specific date appropriate, or should the
determination be made over a longer period of time based on an average
aggregate worldwide market value? How could we improve the timing and
method of determination?
Is it appropriate to allow such an issuer to exit
accelerated filer status only at the end of a fiscal year, or should
the issuer be able to begin filing on a non-accelerated filer basis
with respect to quarterly reports when the issuer is no longer subject
to Exchange Act reporting with respect to its common equity securities
during one of its first three quarters? Would the proposal, if adopted,
adversely impact investor protection in any material respect?
Should we, as proposed, allow an issuer to exit
accelerated filer status if it has no voting or non-voting common
equity held by non-affiliates and no duty to file reports pursuant to
Section 13(a) or 15(d) of the Exchange Act with respect to any common
equity securities, but still has a duty to file such reports with
respect to its debt securities?
Should an issuer be required to file a notice with the
Commission, such as on Form 8-K, announcing that there has been a
change in its periodic report filing deadline status (i.e., the issuer
has moved from one tier in the proposed three-tier accelerated filing
system to a different tier)? If so, when should that issuer be required
to file the notice?
D. Other Amendments
We also are proposing other amendments to our rules. First, we are
proposing to make the same types of conforming changes to Rules 3-01,
3-09 and 3-12 of Regulation S-X that we made when we first adopted the
accelerated filing deadlines in 2002.\53\ In the interest of creating
uniform requirements, our conforming amendments would require financial
information that must be included in Commission filings other than
periodic reports filed on Forms 10-K and 10-Q, such as Securities Act
and Exchange Act registration statements and proxy or information
statements, to be at least as current as the financial information
included in these periodic reports.\54\ Second, we are proposing to
make similar changes to the transition reports that a company must make
when it changes its fiscal year.\55\
---------------------------------------------------------------------------
\53\ See Release No. 33-8128.
\54\ 17 CFR 210.3-01, 210.3-09 and 210.3-12.
\55\ See the proposed amendments to paragraph (j)(1) of Exchange
Act Rules 13a-10 and 15d-10.
---------------------------------------------------------------------------
Finally, we are proposing to revise the public float condition in
the existing Exchange Act Rule 12b-2 definition of ``accelerated
filer'' to indicate that it would have a public float of $75 million or
more but less than $700 million, as of the last business day of the
issuer's most recently completed second fiscal quarter, and to clarify
that the public float term in this definition means the ``aggregate
worldwide market value of the company's voting and non-voting common
equity held by non-affiliates.'' \56\ This is also clarified in the
note to the proposed definition of ``accelerated filer and large
accelerated filer'' that discusses how to calculate public float. The
addition of the word, ``worldwide,'' would codify staff interpretation
of the term \57\ and is consistent with the public float condition in
the recently adopted Securities Act Rule 405 definition of a ``well-
known seasoned issuer.'' The determination of public float would be
premised on the existence of a public trading market for the company's
equity securities.\58\
---------------------------------------------------------------------------
\56\ See the proposed amendment to paragraph (1)(i) of Exchange
Act Rule 12b-2.
\57\ This interpretation is consistent with the longstanding
staff interpretation of the public float determination for Form S-3
and Form F-3 eligibility requirements.
\58\ This is consistent with the requirement in General
Instruction I.B.1 of Form S-3 and Form F-3 that a registrant have a
$75 million market value. Therefore, an entity with $75 million of
common equity securities outstanding but not trading in any public
trading market would not be an accelerated filer or a large
accelerated filer.
---------------------------------------------------------------------------
Request for Comment
Should we make the proposed conforming revisions to
Regulation S-X and the transition reports required by Rules 13a-10 and
15d-10?
Is there any reason why we should not amend the aggregate
market value condition in the accelerated filer definition, as
proposed, to refer to a company's aggregate worldwide market value?
III. General Request for Comments
We request and encourage any interested person to submit comments
on the proposal and any other matters that might have an impact on the
proposal. We request comment from investors, as well as issuers and
other users of Exchange Act information that may be affected by the
proposal. With respect to any comments, we note that such comments are
of greatest assistance to our rulemaking initiative if accompanied by
supporting data and analysis of the issues addressed in those comments.
IV. Paperwork Reduction Act
The proposed amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995,
or PRA.\59\ Form 10-K (OMB Control No. 3235-0063) and Form 10-Q (OMB
Control No. 3235-0070) were adopted pursuant to Sections 13 and 15(d)
of the Exchange Act. They prescribe information that a registrant must
disclose annually and quarterly to the market about its business. An
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless it displays a currently
valid OMB control number.
---------------------------------------------------------------------------
\59\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------
The proposed amendments to the Exchange Act Rule 12b-2 definition
of ``accelerated filer'' and to the periodic reporting deadlines
applicable to accelerated filers, if adopted, would:
Amend the Exchange Act Rule 12b-2 definition of an
``accelerated filer'' to create a new category of accelerated filer,
the ``large accelerated filer,'' for issuers with an aggregate
worldwide market value of voting and non-voting common equity held by
non-affiliates (``public float'') of $700 million or more;
[[Page 56869]]
Re-define an ``accelerated filer'' as an issuer with an
aggregate worldwide market value of voting and non-voting common equity
held by non-affiliates of $75 million or more, but less than $700
million;
Amend the accelerated filing deadlines so that the 60-day
Form 10-K annual report deadline would apply only to the proposed large
accelerated filers. The Form 10-Q quarterly report deadline for large
accelerated filers would remain at 40 days. Periodic report deadlines
for accelerated filers would remain at 75 days for annual reports on
Form 10-K and 40 days for quarterly reports on Form 10-Q;
Amend the accelerated filer definition to allow
accelerated filers with less than $25 million in public float to exit
accelerated filer status without a two-year delay; and
Amend the accelerated filer definition to allow large
accelerated filers with less than $75 million in public float to exit
large accelerated filer status.
Our proposed amendments would not change the amount of information
required to be included in Exchange Act reports. Therefore, they would
neither increase nor decrease the amount of burden hours necessary to
prepare Forms 10-K and 10-Q, for the purposes of the PRA. This analysis
is consistent with the PRA analysis included in the original
accelerated filing proposing and adopting releases.\60\ We reached the
same conclusion in our proposing and adopting releases postponing the
final phase-in period for acceleration of periodic filing.\61\ In that
release, we stated that the amendments changing the due dates for a
temporary period did not increase the information collection burden in
a quantifiable manner, and commenters did not address this position.
---------------------------------------------------------------------------
\60\ See Release No. 33-8089 and Release No. 33-8128. In the
initial accelerated filing proposing release, we acknowledged the
possibility that accelerating the filing deadline could result in
respondents investing more resources in technology, relying more on
outside advisers, higher average charges by outside advisers or
increased efficiencies in preparing periodic reports.
\61\ See Release No. 33-8507 and Release No. 33-8477.
---------------------------------------------------------------------------
V. Cost-Benefit Analysis
The proposed amendments are part of our continuing initiative to
improve the regulatory system for periodic disclosure under the
Exchange Act. We first adopted rules regarding accelerated filing
deadlines in September 2002, requiring issuers with a public float of
$75 million or more and meeting three other conditions specified in
Exchange Act Rule 12b-2 \62\ to accelerate the filing of Exchange Act
periodic reports on Form 10-K and Form 10-Q. We are sensitive to the
costs and benefits that result from our rulemaking. Based on concerns
expressed by the public, we propose to:
---------------------------------------------------------------------------
\62\ Also, as of the end of the fiscal year, the issuer must
have been subject to the requirements of Section 13(a) or 15(d) of
the Exchange Act for a period of at least twelve calendar months;
must have filed at least one annual report pursuant to Section 13(a)
or 15(d) of the Exchange Act; and must not eligible be to use Forms
10-KSB and 10-QSB for its annual and quarterly reports.
---------------------------------------------------------------------------
Create a new category of accelerated filer--the ``large
accelerated filer''--that would be defined in the same manner as
accelerated filers and include issuers with $700 million or more in
public float;
Change the accelerated filing deadlines currently
scheduled to be phased-in; and
Amend the provisions governing issuers' ability to exit
accelerated filer status.
In this section, we examine the costs and benefits of our proposal.
These costs and benefits are difficult to quantify. We request comment
on the type, amount and duration of any costs or benefits from the
proposed revisions to the accelerated filer definition. We request
commenters to provide their views along with supporting data as to the
benefits and costs associated with the proposals.
A. Benefits
Our proposed amendments may afford various benefits. Our proposed
amendments contemplate a three-tier system governing accelerated filing
deadlines that would continue to exclude smaller companies that may
have fewer financial resources or less well-developed financial
reporting systems in place to support the Form 10-K and 10-Q
accelerated filing deadlines. Our proposals also would allow
accelerated filers that are not large accelerated filers to continue
filing both their annual reports on Form 10-K and quarterly reports on
Form 10-Q under the currently scheduled 75-day and 40-day deadlines
without further modification. These accelerated filers would not be
subject to the final phase-in of deadlines that would result in a
further acceleration of deadlines. Under the proposals, even the larger
companies, defined as ``large accelerated filers,'' which would include
companies with a public float of $700 million or more, would be able to
continue to file their quarterly reports on Form 10-Q within 40 days
after fiscal quarter end. They are the only companies that would be
required to file their annual reports within 60 days after fiscal year
end, beginning with reports filed for fiscal years ending on or after
December 15, 2005.
In the initial adopting release for the accelerated filing
deadlines, we acknowledged several possible costs and risks to affected
reporting companies.\63\ Since the adoption of the deadlines, we have
received several comments expressing concern over the ability of
companies to meet the accelerated filing deadlines, in light of the new
requirements adopted in 2003 by the Commission requiring companies to
include a report by management and accompanying auditor's report on the
effectiveness of the company's internal control over financial
reporting in their annual reports. Our proposals maintain the current
periodic report filing deadlines for accelerated filers and the current
quarterly report filing deadlines for both accelerated filers and large
accelerated filers. We are proposing to provide these companies with
additional time to prepare their annual and quarterly reports and to
update their financial statements included in a registration statement,
proxy or information statement. It is difficult to quantify the
benefits that the extra time would afford these companies, however, as
noted in the cost-benefit analysis included in our initial accelerated
filing release,\64\ additional time to prepare the financial reports
may lower preparation costs and limit the internal resources that must
be committed to filing periodic reports. Companies may therefore direct
those resources towards other projects. Also, companies may take into
account this possible lower cost of entry when considering whether to
become a public reporting company.
---------------------------------------------------------------------------
\63\ See Release No. 33-8128.
\64\ See Release 33-8089.
---------------------------------------------------------------------------
The longer deadlines would also allow additional time for
companies' management, external auditors, boards of directors and audit
committees to review the disclosure included in the periodic reports.
Thus, as an indirect benefit for the markets and investors, the
proposed amendments may lead to higher quality and more accurate
reports. As another indirect benefit, as companies are provided with
more time to file their periodic reports, it may be less likely that
companies become subject to the collateral consequences of the late
filing of reports (e.g., losing the ability to use short-form
registration).
We propose to continue to subject large accelerated filers to the
final phase-in of the deadlines for annual reports on Form 10-K. We
continue to
[[Page 56870]]
believe, at this stage, that larger issuers possess the infrastructure
and resources to support further acceleration of filing deadlines for
annual reports, and that they have a greater market following than
smaller companies. We also continue to believe that our accelerated
filing deadlines promote investor protection by providing investors
with timely access to important information. In creating the proposed
category of large accelerated filers, which would continue to file
annual reports under accelerated deadlines, we have proposed a system
that accelerates the delivery of material information to investors and
capital markets for those issuers that we believe are not only more
capable of meeting the deadlines, but also for which we believe the
benefits to investors justify the possible increased costs.
The proposed conforming amendments that relate to the timeliness
requirements for the inclusion of financial information in Securities
Act and Exchange Act registration statements, proxy or information
statements, and transition reports, promote consistency among our
rules. These proposed amendments also may promote capital formation, by
providing companies with a longer window before financial statements in
registration statements become stale.
Our proposals covering the exit from accelerated filer status offer
similar benefits. While we continue to believe that it is important to
minimize fluctuation in and out of accelerated filer status, we have
identified some situations with respect to which we believe the current
rules have been unnecessarily restrictive. One such situation involves
a company that has de-registered all of its common equity but still has
an Exchange Act reporting obligation with respect to another class of
securities. Under the current requirements, this company must still
file reports on an accelerated basis, despite the fact that it would
not have been required to become an accelerated filer initially if it
only had a class of debt securities registered under the Exchange Act.
We believe that our proposed amendment permitting filers to exit based
on a public float measurement would be a more balanced and fair
approach than the current rules that govern the exit from accelerated
filer status.
B. Costs
We believe, and academic studies indicate, that the information
required to be contained in the Exchange Act periodic reports is
valuable to investors and the markets.\65\ For quarterly reports on
Form 10-Q filed by both large accelerated filers and accelerated filers
and for annual reports on Form 10-K filed by accelerated filers with
less than $700 million in public float, the proposed amendments have
the incremental effect of delaying access to periodic report
information to investors and to the capital markets. Information
required by Exchange Act reports provides a verification function
against other unofficial statements made by issuers. Investors can
judge these informal statements against the more extensive formal
disclosure provided in the reports, including financial statements
prepared in accordance with generally accepted accounting principles.
Accelerated filing shortens the delay before this verification can
occur and speeds the timing for comparative financial analyses of
information in those reports. Delaying access to this information may
thereby hinder an investor's ability to make informed decisions on as
timely a basis as would have been possible if the final phase-in of
accelerated filing deadlines were completed. Thus, the amendments which
propose longer deadlines of periodic reports than those currently
scheduled, will delay investors in making informed investment and
valuation decisions, and may increase capital market inefficiencies in
stock valuation and pricing. Likewise, the delay may cause Exchange Act
reports to have less relevance to investors.
---------------------------------------------------------------------------
\65\ For example, see Qi, Wu and Haw, ``The Incremental
Information Content of SEC 10-K Reports Filed under the EDGAR
System,'' in the Journal of Accounting, Auditing and Finance.
---------------------------------------------------------------------------
Moreover, smaller companies generally are followed by fewer
analysts and have less institutional ownership. One study shows that
smaller companies experience a larger price impact on the filing date
than larger companies, indicating that filings contain more valuable
information for smaller companies than larger companies.\66\ The delay
of filing deadlines for smaller companies may be costly to the market,
perhaps even more costly to the market than the delay of filing
deadlines for larger companies. Nevertheless, we recognize inherent
difficulties in the ability to quantify the effect that, for example,
the proposed 15-day delay in the filing of the annual report by
accelerated filers would have on the market.
---------------------------------------------------------------------------
\66\ See Griffin, ``Got Information? Investor Response to Form
10-K and Form 10-Q EDGAR Filings,'' in the Review of Accounting
Studies.
---------------------------------------------------------------------------
The Office of Economic Analysis has provided us with data for
companies listed on NYSE, Amex, NASDAQ, the Over the Counter Bulletin
Board (OTCBB) and Pink Sheets LLC from which we can estimate the number
of companies that would be affected by these proposals. For the most
part, the data is based on a public float definition which is highly
correlated to the Commission's definition of public float.\67\ The data
indicates that 2,307 of the companies that are listed on NYSE, Amex,
NASDAQ, OTCBB or the Pink Sheets have a public float of between $75
million and $700 million, while 1,678 of the companies have a public
float over $700 million. The companies possessing between $75 million
and $700 million in public float represent 23% of the total number of
companies on the exchanges and 4.3% of the total public float of these
companies on the exchanges. The companies with a public float of over
$700 million represent approximately 18% of the total number of
companies on these exchanges and approximately 95% of the total public
float on these exchanges.\68\
---------------------------------------------------------------------------
\67\ Bloomberg was the source of the public float data.
Bloomberg defines public float as the number of shares outstanding
less shares held by insiders and those deemed to be ``stagnant
shareholders.'' ``Stagnant shareholders'' include ESOP's, ESOT's,
QUEST's employee benefit trusts, corporations not actively engaged
in managing money, venture capital companies, and shares held by
governments. When terms for public float were missing from
Bloomberg, market capitalization was used as a proxy for public
float which likely overstates the number of firms in certain
categories. However, given the low number of companies where market
capitalization was used, the difference should not be large.
\68\ In our Securities Offering Reform release, we noted that in
2004, the issuers that met the thresholds for well-known seasoned
issuers represented accounted for about 95% of U.S. equity market
capitalization. See Release No. 33-8591. The eligibility
requirements for a well-known seasoned issuer and the $700 million
threshold for a large accelerated filer are not the same because,
unlike an accelerated filer, a well-known seasoned issuer may also
be an issuer of non-convertible securities, other than common
equity. Nevertheless, we believe that the numbers in the release for
well-known seasoned issuers still provide us with a good
approximation for our purposes.
---------------------------------------------------------------------------
The proposed amendments may produce costs as a result of requiring
companies and their investors to regularly monitor public float levels
to determine companies' filing deadlines. It is difficult to quantify
the number of companies that would be affected by our proposed
amendments relating to the exit of issuers from accelerated filer
status or large accelerated filer status, however, we have reason to
believe that this number is small. Using 2003 data, we estimate that
the amendment which relates to the exit of issuers from accelerated
filing status, if adopted, would allow four respondents to no longer be
subject to the accelerated filer definition and to be able to file
their
[[Page 56871]]
Exchange Act reports up to 15 days later than currently required.\69\
In addition, our research indicates that only 25 companies with $75
million or more in public float in 2003 had their public float drop to
less than $25 million in 2004.\70\
---------------------------------------------------------------------------
\69\ OEA provided us with a list of companies that delisted
their common stock or other common equity from a national securities
exchange or NASDAQ during the 2003 calendar year from the CRSP
Database. From this list, we identified the companies that met the
accelerated filer definition for fiscal years ending on or after
December 15, 2002. Then, we confirmed whether or not the accelerated
filer continued to have an Exchange Act reporting obligation with
respect to a class of debt or equity securities on the Commission's
Electronic Data Gathering, Analysis, and Retrieval System
(``EDGAR''). It is our understanding that the data in CRSP does not
include a complete list of common equity traded on the OTC Bulletin
Board, so our estimate may understate the actual number of companies
that would be affected by our proposed revision to the accelerated
filer definition.
\70\ In deriving these estimates, we used common equity data as
an approximation for public float data from the Thomson Worldscope
Global Database.
---------------------------------------------------------------------------
VI. Consideration of Impact on the Economy, Burden on Competition and
Promotion of Efficiency, Competition and Capital Formation
For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996, or ``SBREFA,'' \71\ we solicit data to determine whether
the proposed amendments constitute ``major'' rules. Under SBREFA, a
rule is considered ``major'' where, if adopted, it results or is likely
to result in:
---------------------------------------------------------------------------
\71\ Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
---------------------------------------------------------------------------
An annual effect on the economy of $100 million or more;
A major increase in costs or prices for consumers or
individual industries; or
Significant adverse effects on competition, investment or
innovation.
We request comment on the potential impact of the proposed amendments
on the economy on an annual basis. Commenters are requested to provide
empirical data and other factual support for their views if possible.
Section 23(a)(2) of the Exchange Act \72\ requires us, when
adopting rules under the Exchange Act, to consider the impact that any
new rule would have on competition. Section 23(a)(2) prohibits us from
adopting any rule that would impose a burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. In addition, Section 2(b) of the Securities Act \73\ and Section
3(f) of the Exchange Act \74\ require us, when engaging in rulemaking
where we are required to consider or determine whether an action is
necessary or appropriate in the public interest, to consider, in
addition to the protection of investors, whether the action will
promote efficiency, competition and capital formation.
---------------------------------------------------------------------------
\72\ 15 U.S.C. 78w(a)(2).
\73\ 15 U.S.C. 77b(b).
\74\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
The proposed amendments balance the timeliness and accessibility of
Exchange Act reports to investors and the financial markets against the
need of companies and their auditors to conduct, without undue cost,
high-quality and thorough assessments and audits of the companies'
financial information, so as to increase the likelihood that more
complete, reliable, and timely information contained in Exchange Act
reports is available to the market. The creation of the category of
large accelerated filers and the requirement that large accelerated
filers file their annual reports within 60 days after fiscal year end
are proposed to preserve the timeliness and accessibility of issuer
information so that investors can more easily make informed investment
and voting decisions. We believe it is appropriate to fully implement
the 60-day accelerated deadline for annual reports for large
accelerated filers, given their internal reporting resources and the
greater market interest that they generate. Similarly, we are seeking
to retain the 40-day deadline for the quarterly reports on Form 10-Q
for large accelerated filers and the 75 and 40-day deadlines for the
annual and quarterly reports of accelerated filers that are not large
accelerated filers. We have proposed that issuers with a public float
that has dropped below $25 million be allowed to exit accelerated filer
status, without the current two-year delay.
Informed investor decisions generally promote market efficiency and
capital formation. The proposals would affect accelerated filers
differently depending on their public float. Some accelerated filers
would be required to further accelerate their filing deadlines, while
others would remain subject to current filing deadlines. A few would be
able to exit accelerated filer status more quickly. This may enhance
competition by avoiding the imposition of onerous burdens on smaller
competitors who are least able to bear them. This may also have the
effect of allowing some competitors to file their Exchange Act reports
later than others, potentially providing some competitive advantage to
the later filers. We have also heard concerns from some issuers that
accelerated filing deadlines may affect their ability to provide
accurate and reliable information. We have sought to minimize these
concerns by limiting further acceleration of annual reports to only the
largest public issuers that are likely to have the greatest internal
reporting resources. In contrast, allowing issuers to retain their
current filing deadlines or to exit accelerated filer status would have
the effect of delaying the receipt of information by investors, and the
delay may affect an investor's ability to make informed decisions in as
timely a fashion. These amendments may further promote capital
formation by diminishing the risk that companies would not be able to
utilize short-form registration because of the untimely filing of
reports.
Our conforming amendments to Regulation S-X which cover the
timeliness of financial information in registration statements and
proxy or information statements may affect capital formation. This may
promote capital formation by providing companies with a longer window
to access capital markets before financial information becomes stale.
The possibility of these effects and their magnitude if they were
to occur are difficult to quantify. We request comment on whether the
proposal, if adopted, would promote efficiency, competition and capital
formation or have an impact or burden on competition. Commenters are
requested to provide empirical data and other factual support for their
views if possible.
VII. Initial Regulatory Flexibility Analysis
This Initial Regulatory Flexibility Analysis, or IRFA, has been
prepared in accordance with the Regulatory Flexibility Act.\75\ This
IRFA involves proposed amendments to the rules and forms under the
Securities Act and the Exchange Act to:
---------------------------------------------------------------------------
\75\ 5 U.S.C. 603.
---------------------------------------------------------------------------
Create a new category of accelerated filer--the ``large
accelerated filer''--for issuers with a public float of $700 million or
more;
Re-define an ``accelerated filer'' as an issuer with an
aggregate worldwide market value of voting and non-voting common equity
held by non-affiliates of $75 million or more, but less than $700
million;
Amend the accelerated filing deadlines so that the 60-day
Form 10-K annual report deadline would apply only to the proposed large
accelerated filers. The Form 10-Q quarterly report deadline for large
accelerated filers would remain at 40 days. Periodic report deadlines
for other accelerated filers would remain at 75 days for annual reports
on Form 10-K and 40
[[Page 56872]]
days for quarterly reports on Form 10-Q;
Amend the accelerated filer definition to allow
accelerated filers with less than $25 million in public float to exit
accelerated filer status without the current two-year delay; and
Amend the accelerated filer definition to allow large
accelerated filers with less than $75 million in public float to exit
large accelerated filer status.
A. Reasons for, and Objectives of, Proposed Amendments
The proposed amendments seek to balance the interests of investors
and the market to have timely access to important information contained
in periodic reports against the need of companies and their auditors to
conduct, without undue cost, high-quality and thorough assessments and
audits of the companies financial information, so as to increase the
likelihood that more complete, reliable, and timely information
contained in Exchange Act reports is available to the market. The
proposed amendments relate to the acceleration of filing deadlines for
annual reports on Form 10-K and quarterly report on Form 10-Q for
accelerated filers. We propose to change the current rules and forms
to:
Create a new category of accelerated filer--the ``large
accelerated filer''--that would be defined in the same manner as an
accelerated filer and include issuers with $700 million or more of
public float;
Amend the periodic report deadlines so that only the large
accelerated filer become subject to the final phase-in of the
accelerated Form 10-K deadlines; and
Amend the definition of accelerated filer to facilitate
the speedier exit by accelerated filers from accelerated filer status.
While we continue to believe that periodic reports contain information
that is essential to conduct comparative financial analysis, and that
timely access to these reports can greatly benefit investors and the
market, we share in the concern expressed by several companies
regarding the currently imposed deadlines. These comments have led to
our proposals today which would subject only large accelerated filers
to the shortest annual report accelerated filing deadlines, which we
believe is achievable by issuers without undue cost. In doing so, we
acknowledge the relative ability of different issuers to support the
accelerated report deadlines. In proposing new rules governing the exit
from accelerated filer status, we seek to eliminate unnecessary
restrictions and delays, and attempt to achieve a more streamlined set
of rules.
B. Legal Basis
We are proposing the amendments to the forms and rules under the
authority set forth in Sections 3(b) and 19(a) of the Securities Act
and Sections 12, 13, 15(d) and 23(a) of the Exchange Act.
C. Small Entities Subject to the Proposed Amendments
For purposes of the Regulatory Flexibility Act, Exchange Act Rule
0-10(a) \76\ defines an issuer, other than an investment company, to be
a ``small business'' or ``small organization'' if it had total assets
of $5 million or less on the last day of its most recent fiscal year.
---------------------------------------------------------------------------
\76\ 17 CFR 240.0-10(a).
---------------------------------------------------------------------------
The proposed amendments would affect only the Exchange Act
reporting companies that would be defined as ``accelerated filers'' or
``large accelerated filers.'' Under the current rules, an issuer
becomes an accelerated filer once it first meets the following
conditions as of the end of its fiscal year:
The issuer has an aggregate market value of voting and
non-voting common equity held by non-affiliates of the issuer (referred
to as ``public float'') of $75 million or more, as of the last business
day of the issuer's most recently completed second fiscal quarter; \77\
---------------------------------------------------------------------------
\77\ For purposes of the accelerated filer definition, the
issuer must compute the aggregate market value of its outstanding
voting and non-voting common equity by use of the price at which the
common equity was last sold, or the average of the bid and asked
prices of such common equity, in the principal market for such
common equity, as of the last business day of its most recently
completed second fiscal quarter.
---------------------------------------------------------------------------
The issuer has been subject to the reporting requirements
of Section 13(a) or 15(d) of the Exchange Act for a period of at least
12 calendar months;
The issuer previously has filed at least one annual
report; and
The issuer is not eligible to use Forms 10-KSB and 10-QSB
for its annual and quarterly reports.
An issuer becomes a large accelerated filer in much the same way,
except that a large accelerated filer has an aggregate market value of
voting and non-voting common equity held by non-affiliates of the
issuer (referred to as ``public float'') of $700 million or more, as of
the last business day of the issuer's most recently completed second
fiscal quarter.
According to the Standard & Poors Research Insight Compustat
Database, as of a recent date, of the 990 reporting companies listed
with assets of $5 million or less, 28, or 2.8%, had a market
capitalization greater than $75 million and three had a market
capitalization greater than $700 million.\78\ Based on our research, we
do not expect these proposals to affect a substantial number of small
entities.
---------------------------------------------------------------------------
\78\ It is our understanding that the data in the Compustat
Database is derived principally from larger issuers, so our estimate
could understate the actual number of issuers that would be affected
by the proposals. This sample was taken in September 2005. Assuming
that this sample is representative of small entities, the
accelerated filer public float requirement has the effect of
excluding almost all small entities from the definition.
---------------------------------------------------------------------------
D. Reporting, Recordkeeping, and Other Compliance Requirements
Changes to Form 10-K annual report and Form 10-Q quarterly report
filing deadlines should not affect smaller entities. Our proposals
would subject large accelerated filers with $700 million or more in
public float to the currently scheduled final phase-in of the
accelerated Form 10-K annual report deadline of 60 days, but they would
continue to file their quarterly reports on Form 10-Q under the current
40-day deadline. Accelerated filers that are not large accelerated
filers or those with at least $75 million in public float, but less
than $700 million, as of the last day of the second fiscal quarter,
would continue filing their annual reports and quarterly reports on
Forms 10-K and 10-Q under the current 75-day and 40-day deadlines,
respectively.\79\
---------------------------------------------------------------------------
\79\ We also noted that the accelerated filer deadlines have
little, if any, effect on smaller entities. See Release No. 33-8129.
---------------------------------------------------------------------------
Our other proposed amendments governing the exit from accelerated
filer status could have an impact on a company that becomes a small
entity after its public float threshold has dropped below $25 million.
However, we do not expect the impact of the proposed amendments on
small entities to be significant, because we expect that only a few
accelerated filers would become small entities each year.\80\ For those
that do, the proposed amendments would streamline their exit from
accelerated filer status, and make it easier for such issuers to begin
filing their reports under longer deadlines. Specifically, under the
proposed amendments, issuers no longer would have to wait for two years
before they could start filing under longer deadlines. We seek comment
on whether any of our proposals affect the reporting burden of smaller
entities.
---------------------------------------------------------------------------
\80\ Based on data from the Thomson Worldscope Global Database,
we estimate that only 25 companies had a public float of $75 million
in 2003, but less than $25 million in 2004.
---------------------------------------------------------------------------
[[Page 56873]]
E. Duplicative, Overlapping or Conflicting Federal Rules
We believe that there are no rules that duplicate, overlap or
conflict with the proposed amendments.
F. Significant Alternatives
The Regulatory Flexibility Act directs us to consider significant
alternatives that would accomplish our stated objectives, while
minimizing any significant adverse impact on small entities. In
connection with our proposals, we considered the following
alternatives:
1. Establishing different compliance or reporting requirements for
smaller entities that take into account the resources available to
smaller entities;
2. Setting different thresholds upon which companies can exit from
accelerated filer status; and
3. Using different standards by which companies are measured to
determine whether they should be subject to different regulatory
burdens, taking into account the needs of smaller entities.
We have considered different changes to our rules and forms to
achieve our regulatory objectives, and where possible, have taken steps
to minimize the effect of the rules on smaller entities. Our proposed
amendments likely would have a favorable impact on smaller entities as
they now permit more companies to exit from accelerated status and
permit companies to exit from accelerated status without the current
two-year delay. Therefore, as a result of our amendments, it is less
likely that smaller entities would be subject to accelerated deadlines
of their periodic reports.
G. General Request for Comments
We solicit written comments regarding this analysis. We request
comment on whether the proposals could have an effect that we have not
considered. We request that commenters describe the nature of any
impact on small entities and provide empirical data to support the
extent of the impact.
VIII. Update to Codification of Financial Reporting Policies
The Commission proposes to amend the ``Codification of Financial
Reporting Policies'' announced in Financial Reporting Release No. 1
(April 15, 1982) as follows:
1. By amending Section 102.05.(2) to read as follows:
(2) Conforming the Filing Requirements of Transition Reports to the
Current Requirements for Forms 10-Q and 10-K
To conform to the current filing periods for reports on Forms 10-K
and 10-Q, the filing period for transition reports on Form 10-K is 60
days for large accelerated filers, 75 days for accelerated filers, and
90 days for other issuers after the close of the transition period or
the date of the determination to change the fiscal year, whichever is
later, and for transition reports on Form 10-Q, the filing period is 40
days for large accelerated filers and accelerated filers or 45 days for
other issuers after the later of these two events.
2. By amending Section 102.05. to revise the preliminary note to
the ``Appendix'' to Section 102.05. to read as follows:
Preliminary Note: The following examples are applicable if the
issuer is neither a large accelerated filer nor an accelerated filer.
If the issuer is a large accelerated filer, substitute 60 days for 90
days in the examples for transition reports on Form 10-K, and
substitute 40 days for 45 days in the examples for transition reports
on Form 10-Q. If the issuer is an accelerated filer, substitute 75 days
for 90 days in the examples for transition reports on Form 10-K, and
subsitute 40 days for 45 days in the examples for transition reports on
Form 10-Q.
3. By amending Section 302.01.a. to:
a. Replace the phrase ``after 45 days but within 90, 75 or 60 days
of the end of the registrant's fiscal year for accelerated filers, as
applicable depending on the registrant's fiscal year (or after 45 days
but within 90 days of the end of the registrant's fiscal year for other
registrants)'' with the phrase ``after 45 days but within 60 days of
the end of the registrant's fiscal year for large accelerated filers or
after 45 days but within 75 days of the end of the registrant's fiscal
year for accelerated filers (or after 45 days but within 90 days of the
end of the registrant's fiscal year for other registrants)'' in the
second paragraph of Section 302.01.a.; and
b. Replace the phrase ``after 45 days but within 90, 75 or 60 days
of the end of its fiscal year if the registrant is an accelerated
filer, as applicable depending on the registrant's fiscal year (i.e.,
February 16 to March 31, 15, or 1 for calendar year companies) (or
after 45 days but within 90 days of the end of its fiscal year for
other registrants (i.e., February 16 to March 31 for calendar year
companies))'' with the phrase ``after 45 days but within 60 days of the
end of its fiscal year if the registrant is a large accelerated filer
(i.e., February 16 to March 1 for calendar year companies), after 45
days but within 75 days of the end of its fiscal year if the registrant
is an accelerated filer (i.e., February 16 to March 15 for calendar
year companies), or after 45 days but within 90 days of the end of its
fiscal year for other registrants (i.e., February 16 to March 31 for
calendar year companies)'' in the first sentence of the fourth
paragraph of Section 302.01.a.
4. By amending Section 302.01.b. to:
a. Replace the phrase ``134, 129 or 124 days subsequent to the end
of a registrant's fiscal year if the registrant is an accelerated
filer, as applicable depending on the registrant's fiscal year (or 134
days subsequent to the end of a registrant's fiscal year for other
registrants)'' with the phrase ``129 days subsequent to the end of a
registrant's fiscal year if the registrant is a large accelerated filer
or an accelerated filer (or 134 days subsequent to the end of a
registrant's fiscal year for other registrants)'' in the first sentence
of Section 302.01.b.; and
b. Replace the phrase ``135, 130 or 125 days of the date of the
filing if the registrant is an accelerated filer, as applicable
depending on the registrant's fiscal year (or 135 days of the date of
the filing for other registrants)'' with the phrase ``130 days of the
date of the filing if the registrant is a large accelerated filer or an
accelerated filer (or 135 days of the date of the filing for other
registrants)'' in the second sentence of Section 302.01.b.
5. By amending Section 302.01.c. to:
a. Replace the phrase ``135, 130 or 125 days or more, if the
registrant is an accelerated filer, as applicable depending on the
registrant's fiscal year (or 135 days or more for other registrants)''
with the phrase ``130 days or more, if the registrant is a large
accelerated filer or an accelerated filer (or 135 days or more for
other registrants)'' in the first paragraph of Section 302.01.c.;
b. Replace the phrase ``as of an interim date within 135, 130 or
125 days, if the registrant is an accelerated filer, as applicable
depending on the registrant's fiscal year (or 135 days for other
registrants)'' with the phrase ``as of an interim date within 125 days,
if the registrant is a large accelerated filer, or 130 days, if the
registrant is an accelerated filer (or 135 days for other
registrants)'' in the first paragraph of Section 302.01.c.; and
c. Replace the phrase ``after 45 days but within 90, 75 or 60 days
of the end of the fiscal year if the registrant is an accelerated
filer, as applicable depending on the registrant's fiscal year
[[Page 56874]]
(or after 45 days but within 90 days of the end of the fiscal year for
other registrants)'' with the phrase ``after 45 days but within 60 days
of the end of the fiscal year if the registrant is a large accelerated
filer, after 45 days but within 75 days if the registrant is an
accelerated filer (or after 45 days but within 90 days of the end of
the fiscal year for other registrants)'' in the second and third
sentences of the second paragraph of Section 302.01.c.
Note: The Codification is a separate publication of the
Commission. It will not appear in the Code of Federal Regulations.
IX. Statutory Authority and Text of Proposed Amendments
The amendments contained in this document are being proposed under
the authority set forth in Sections 3(b) and 19(a) of the Securities
Act and Sections 12, 13, 15(d) and 23(a) of the Exchange Act.
Text of Proposed Amendments
List of Subjects in 17 CFR Parts 210, 229, 240 and 249
Reporting and recordkeeping requirements, Securities.
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is amended as follows.
PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF
1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT
COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 1940, AND ENERGY
POLICY AND CONSERVATION ACT OF 1975
1. The authority citation for Part 210 continues to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77aa(25), 77aa(26), 78c, 78j-1, 78l, 78m, 78n, 78o(d), 78q, 78u-5,
78w(a), 78ll, 78mm, 79e(b), 79j(a), 79n, 79t(a), 80a-8, 80a-20, 80a-
29, 80a-30, 80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, unless
otherwise noted.
2. Section 210.3-01 is amended by revising paragraphs (e) and (i)
to read as follows:
Sec. 210.3-01 Consolidated balance sheets.
* * * * *
(e) For filings made after the number of days specified in
paragraph (i)(2) of this section, the filing shall also include a
balance sheet as of an interim date within the following number of days
of the date of filing:
(1) 130 days for large accelerated filers and accelerated filers
(as defined in Sec. 240.12b-2 of this chapter); and
(2) 135 days for all other registrants.
* * * * *
(i)(1) For purposes of paragraphs (c) and (d) of this section, the
number of days shall be:
(i) 60 days for large accelerated filers (as defined in Sec.
240.12b-2 of this chapter);
(ii) 75 days for accelerated filers (as defined in Sec. 240.12b-2
of this chapter); and
(iii) 90 days for all other registrants.
(2) For purposes of paragraph (e) of this section, the number of
days shall be:
(i) 129 days subsequent to the end of the registrant's most recent
fiscal year for large accelerated filers and accelerated filers (as
defined in Sec. 240.12b-2 of this chapter); and
(ii) 134 days subsequent to the end of the registrant's most recent
fiscal year for all other registrants.
3. Section 210.3-09 is amended by revising paragraphs (b)(3) and
(b)(4) to read as follows:
Sec. 210.3-09 Separate financial statements of subsidiaries not
consolidated and 50 percent or less owned persons.
* * * * *
(b) * * *
(3) The term registrant's number of filing days means:
(i) 60 days if the registrant is a large accelerated filer;
(ii) 75 days if the registrant is an accelerated filer; and
(iii) 90 days for all other registrants.
(4) The term subsidiary's number of filing days means:
(i) 60 days if the 50 percent or less owned person is a large
accelerated filer;
(ii) 75 days if the 50 percent or less owned person is an
accelerated filer; and
(iii) 90 days for all other 50 percent or less owned persons.
* * * * *
4. Section 210.3-12 is amended by revising paragraph (g) to read as
follows:
Sec. 210.3-12 Age of financial statements at effective date of
registration statement or at mailing date of proxy statement.
* * * * *
(g)(1) For purposes of paragraph (a) of this section, the number of
days shall be:
(i) 130 days for large accelerated filers and accelerated filers
(as defined in Sec. 240.12b-2 of this chapter); and
(ii) 135 days for all other registrants.
(2) For purposes of paragraph (b) of this section, the number of
days shall be:
(i) 60 days for large accelerated filers (as defined in Sec.
240.12b-2 of this chapter);
(ii) 75 days for accelerated filers (as defined in Sec. 240.12b-2
of this chapter); and
(iii) 90 days for all other registrants.
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975-REGULATION S-K
5. The authority citation for Part 229 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj,
77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll,
78mm, 79e, 79j, 79n, 79t, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-11, and 7201 et seq.; and 18
U.S.C. 1350, unless otherwise noted.
* * * * *
6. Section 229.101 is amended by revising paragraph (e) to read as
follows:
Sec. 229.101 (Item 101) Description of business.
* * * * *
(e) Available information. Disclose the information in paragraphs
(e)(1), (e)(2) and (e)(3) of this section in any registration statement
you file under the Securities Act (15 U.S.C. 77a et seq.), and disclose
the information in paragraphs (e)(3) and (e)(4) of this section if you
are filing an annual report on Form 10-K (Sec. 249.310 of this
chapter) and are an accelerated filer or a large accelerated filer (as
defined in Sec. 240.12b-2 of this chapter):
(1) Whether you file reports with the Securities and Exchange
Commission. If you are a reporting company, identify the reports and
other information you file with the SEC.
(2) That the public may read and copy any materials you file with
the SEC at the SEC's Public Reference Room at 100 F Street, NE.,
Washington, DC 20549. State that the public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-
SEC-0330. If you are an electronic filer, state that the SEC maintains
an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file
electronically with the SEC and state the address of that site (http://www.sec.gov
).
(3) You are encouraged to give your Internet address, if available,
except that if you are filing your annual report on Form 10-K and are
an accelerated filer
[[Page 56875]]
or a large accelerated filer, you must disclose your Internet address,
if you have one.
(4)(i) Whether you make available free of charge on or through your
Internet Web site, if you have one, your annual report on Form 10-K,
quarterly reports on Form 10-Q (Sec. 249.308a of this chapter),
current reports on Form 8-K (Sec. 249.308 of this chapter), and
amendments to those reports filed or furnished pursuant to section
13(a) or 15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d)) as soon
as reasonably practicable after you electronically file such material
with, or furnish it to, the SEC;
(ii) If you do not make your filings available in this manner, the
reasons you do not do so (including, where applicable, that you do not
have an Internet Web site); and
(iii) If you do not make your filings available in this manner,
whether you voluntarily will provide electronic or paper copies of your
filings free of charge upon request.
* * * * *
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
7. The authority citation for Part 240 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5,
78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless
otherwise noted.
* * * * *
8. Section 240.12b-2 is amended by revising the definition of
``Accelerated filer'' to read as follows:
Sec. 240.12b-2 Definitions.
* * * * *
Accelerated filer and large accelerated filer. (1) Accelerated
filer. The term accelerated filer means an issuer after it first meets
the following conditions as of the end of its fiscal year:
(i) The issuer had an aggregate worldwide market value of the
voting and non-voting common equity held by its non-affiliates of $75
million or more, but less than $700 million, as of the last business
day of the issuer's most recently completed second fiscal quarter;
(ii) The issuer has been subject to the requirements of section
13(a) or 15(d) of the Act (15 U.S.C. 78m or 78o(d)) for a period of at
least twelve calendar months;
(iii) The issuer has filed at least one annual report pursuant to
section 13(a) or 15(d) of the Act; and
(iv) The issuer is not eligible to use Forms 10-KSB and 10-QSB
(Sec. 249.310b and Sec. 249.308b of this chapter) for its annual and
quarterly reports.
(2) Large accelerated filer. The term large accelerated filer means
an issuer after it first meets the following conditions as of the end
of its fiscal year:
(i) The issuer had an aggregate worldwide market value of the
voting and non-voting common equity held by its non-affiliates of $700
million or more, as of the last business day of the issuer's most
recently completed second fiscal quarter;
(ii) The issuer has been subject to the requirements of section
13(a) or 15(d) of the Act for a period of at least twelve calendar
months;
(iii) The issuer has filed at least one annual report pursuant to
section 13(a) or 15(d) of the Act; and
(iv) The issuer is not eligible to use Forms 10-KSB and 10-QSB for
its annual and quarterly reports.
(3) Entering and exiting accelerated filer and large accelerated
filer status. (i) The determination at the end of the issuer's fiscal
year for whether a non-accelerated filer becomes an accelerated filer,
or whether a non-accelerated filer or accelerated filer becomes a large
accelerated filer, governs the annual report to be filed for that
fiscal year, the quarterly and annual reports to be filed for the
subsequent fiscal year and all annual and quarterly reports to be filed
thereafter while the issuer remains an accelerated filer or large
accelerated filer.
(ii) Once an issuer becomes an accelerated filer, it will remain an
accelerated filer unless the issuer determines at the end of a fiscal
year that the aggregate worldwide market value of the voting and non-
voting common equity held by non-affiliates of the issuer was less than
$25 million, as of the last business day of the issuer's most recently
completed second fiscal quarter. An issuer making this determination
becomes a non-accelerated filer. The issuer will not become an
accelerated filer again unless it subsequently meets the conditions in
paragraph (1) of this definition.
(iii) Once an issuer becomes a large accelerated filer, it will
remain a large accelerated filer unless the issuer determines at the
end of a fiscal year that the aggregate worldwide market value of the
voting and non-voting common equity held by non-affiliates of the
issuer was less than $75 million, as of the last business day of the
issuer's most recently completed second fiscal quarter. If the issuer's
aggregate worldwide market value was $25 million or more, but less than
$75 million, as of the determination date, the issuer becomes an
accelerated filer. If the issuer's aggregate worldwide market value was
less than $25 million as of the determination date, the issuer becomes
a non-accelerated filer. An issuer will not become a large accelerated
filer again unless it subsequently meets the conditions in paragraph
(2) of this definition.
(iv) The determination at the end of the issuer's fiscal year for
whether an accelerated filer becomes a non-accelerated filer, or a
large accelerated filer becomes an accelerated filer or a non-
accelerated filer, governs the annual report to be filed for that
fiscal year, the quarterly and annual reports to be filed for the
subsequent fiscal year and all annual and quarterly reports to be filed
thereafter while the issuer remains an accelerated filer or non-
accelerated filer.
Note to paragraphs (1), (2) and (3): The aggregate worldwide
market value of the issuer's outstanding voting and non-voting
common equity shall be computed by use of the price at which the
common equity was last sold, or the average of the bid and asked
prices of such common equity, in the principal market for such
common equity.
* * * * *
9. Section 240.13a-10 is amended by revising paragraph (j) to read
as follows:
Sec. 240.13a-10 Transition reports.
* * * * *
(j)(1) For transition reports to be filed on the form appropriate
for annual reports of the issuer, the number of days shall be:
(i) 60 days for large accelerated filers (as defined in Sec.
240.12b-2);
(ii) 75 days for accelerated filers (as defined in Sec. 240.12b-
2); and
(iii) 90 days for all other issuers; and
(2) For transition reports to be filed on Form 10-Q or Form 10-QSB
(Sec. 249.308a or Sec. 249.308b of this chapter), the number of days
shall be:
(i) 40 days for large accelerated filers and accelerated filers (as
defined in Sec. 240.12b-2); and
(ii) 45 days for all other issuers.
* * * * *
10. Section 240.15d-10 is amended by revising paragraph (j) to read
as follows:
Sec. 240.15d-10 Transition reports.
* * * * *
(j)(1) For transition reports to be filed on the form appropriate
for annual reports of the issuer, the number of days shall be:
[[Page 56876]]
(i) 60 days for large accelerated filers (as defined in Sec.
240.12b-2);
(ii) 75 days for accelerated filers (as defined in Sec. 240.12b-
2); and
(iii) 90 days for all other issuers; and
(2) For transition reports to be filed on Form 10-Q or Form 10-QSB
(Sec. 249.308a or Sec. 249.308b of this chapter), the number of days
shall be:
(i) 40 days for large accelerated filers and accelerated filers (as
defined in Sec. 240.12b-2); and
(ii) 45 days for all other issuers.
* * * * *
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
11. The authority citation for Part 249 continues to read, in part,
as follows:
Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C.
1350, unless otherwise noted.
* * * * *
12. Section 249.308a is amended by revising paragraph (a) to read
as follows:
Sec. 249.308a Form 10-Q, for quarterly and transition reports under
sections 13 or 15(d) of the Securities Exchange Act of 1934.
(a) Form 10-Q shall be used for quarterly reports under section 13
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)), required to be filed pursuant to Sec. 240.13a-13 or Sec.
240.15d-13 of this chapter. A quarterly report on this form pursuant to
Sec. 240.13a-13 or Sec. 240.15d-13 of this chapter shall be filed
within the following period after the end of the first three fiscal
quarters of each fiscal year, but no quarterly report need be filed for
the fourth quarter of any fiscal year:
(1) 40 days after the end of the fiscal quarter for large
accelerated filers and accelerated filers (as defined in Sec. 240.12b-
2 of this chapter); and
(2) 45 days after the end of the fiscal quarter for all other
registrants.
* * * * *
13. Form 10-Q (referenced in Sec. 249.308a) is amended by:
a. Revising General Instruction A.1.; and
b. Revising the check box on the cover page that starts ``Indicate
by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) * * *.''
The revisions read as follows:
Note: The text of Form 10-Q does not, and this amendment will
not, appear in the Code of Federal Regulations.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
General Instructions
A. Rule as to Use of Form 10-Q.
1. Form 10-Q shall be used for quarterly reports under Section 13
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)), filed pursuant to Rule 13a-13 (17 CFR 240.13a-13) or Rule 15d-
13 (17 CFR 240.15d-13). A quarterly report on this form pursuant to
Rule 13a-13 or Rule 15d-13 shall be filed within the following period
after the end of each of the first three fiscal quarters of each fiscal
year, but no report need be filed for the fourth quarter of any fiscal
year:
a. 40 days after the end of the fiscal quarter for large
accelerated filers and accelerated filers (as defined in 17 CFR
240.12b-2); and
b. 45 days after the end of the fiscal quarter for all other
registrants.
* * * * *
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
* * * * *
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of ``accelerated filer and large accelerated filer'' in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer . . . . Accelerated filer . . . . Non-
accelerated filer . . . .
* * * * *
14. Section 249.310 is revised to read as follows:
Sec. 249.310 Form 10-K, for annual and transition reports pursuant to
sections 13 or 15(d) of the Securities Exchange Act of 1934.
(a) This form shall be used for annual reports pursuant to sections
13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)) for which no other form is prescribed. This form also shall be
used for transition reports filed pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934.
(b) Annual reports on this form shall be filed within the following
period:
(1) 60 days after the end of the fiscal year covered by the report
for large accelerated filers (as defined in Sec. 240.12b-2 of this
chapter);
(2) 75 days after the end of the fiscal year covered by the report
for accelerated filers (as defined in Sec. 240.12b-2 of this chapter);
and
(3) 90 days after the end of the fiscal year covered by the report
for all other registrants.
(c) Transition reports on this form shall be filed in accordance
with the requirements set forth in Sec. 240.13a-10 or Sec. 240.15d-10
of this chapter applicable when the registrant changes its fiscal year
end.
(d) Notwithstanding paragraphs (b) and (c) of this section, all
schedules required by Article 12 of Regulation S-X (Sec. Sec. 210.12-
01-210.12-29 of this chapter) may, at the option of the registrant, be
filed as an amendment to the report not later than 30 days after the
applicable due date of the report.
15. Form 10-K (referenced in Sec. 249.310) is amended by:
a. Revising General Instruction A.;
b. Revising the check box on the cover page that starts ``Indicate
by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). * * *;'' and
c. Revising Item 1B. of Part I.
The revisions read as follows:
Note: The text of Form 10-K does not, and this amendment will
not, appear in the Code of Federal Regulations.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
* * * * *
General Instructions
A. Rule as to Use of Form 10-K.
(1) This Form shall be used for annual reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)) (the ``Act'') for which no other form is prescribed. This Form
also shall be used for transition reports filed pursuant to Section 13
or 15(d) of the Act.
(2) Annual reports on this Form shall be filed within the following
period:
(a) 60 days after the end of the fiscal year covered by the report
for large accelerated filers (as defined in 17 CFR 240.12b-2):
(b) 75 days after the end of the fiscal year covered by the report
for accelerated filers (as defined in 17 CFR 240.12b-2); and
(c) 90 days after the end of the fiscal year covered by the report
for all other registrants.
(3) Transition reports on this Form shall be filed in accordance
with the requirements set forth in Rule 13a-10 (17 CFR 240.13a-10) or
Rule 15d-10 (17 CFR 240.15d-10) applicable when the registrant changes
its fiscal year end.
(4) Notwithstanding paragraphs (2) and (3) of this General
Instruction A., all schedules required by Article 12 of Regulation S-X
(17 CFR 210.12-01 `` 210.12-29) may, at the option of the
[[Page 56877]]
registrant, be filed as an amendment to the report not later than 30
days after the applicable due date of the report.
* * * * *
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
* * * * *
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of ``accelerated filer and large accelerated filer'' in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer . . . .
Accelerated filer . . . .
Non-accelerated filer . . . .
* * * * *
Part I
* * * * *
Item 1. * * *
Item 1B. Unresolved Staff Comments.
If the registrant is an accelerated filer or a large accelerated
filer, as defined in Rule 12b-2 of the Exchange Act (Sec. 240.12b-2 of
this chapter), or is a well-known seasoned issuer as defined in Rule
405 of the Securities Act (Sec. 230.405 of this chapter) and has
received written comments from the Commission staff regarding its
periodic or current reports under the Act not less than 180 days before
the end of its fiscal year to which the annual report relates, and such
comments remain unresolved, disclose the substance of any such
unresolved comments that the registrant believes are material. Such
disclosure may provide other information including the position of the
registrant with respect to any such comment.
* * * * *
16. Form 20-F (referenced in Sec. 249.220f) is amended by:
a. Adding a check box to the cover page before the paragraph that
starts ``Indicate by check mark which financial statement item the
registrant has elected to follow * * *'' and
b. Revising Item 4A. to Part I.
The addition and revision read as follows:
Note: The text of Form 20-F does not, and this amendment will
not, appear in the Code of Federal Regulations.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 20-F
* * * * *
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of ``accelerated filer and large accelerated filer'' in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer . . . .
Accelerated filer . . . .
Non-accelerated filer . . . .
* * * * *
Part 1
* * * * *
Item 4. * * *
Item 4A. Unresolved Staff Comments
If the registrant is an accelerated filer or a large accelerated
filer, as defined in Rule 12b-2 of the Exchange Act (Sec. 240.12b-2 of
this chapter), or is a well-known seasoned issuer as defined in Rule
405 of the Securities Act (Sec. 230.405 of this chapter) and has
received written comments from the Commission staff regarding its
periodic reports under the Exchange Act not less than 180 days before
the end of its fiscal year to which the annual report relates, and such
comments remain unresolved, disclose the substance of any such
unresolved comments that the registrant believes are material. Such
disclosure may provide other information including the position of the
registrant with respect to any such comment.
* * * * *
Dated: September 22, 2005.
By the Commission.
Jonathan G. Katz,
Secretary.
[FR Doc. 05-19427 Filed 9-28-05; 8:45 am]
BILLING CODE 8010-01-P