Revisions to Accelerated Filer Definition and Accelerated Deadlines for Filing Periodic Reports, 76626-76643 [05-24479]
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Federal Register / Vol. 70, No. 247 / Tuesday, December 27, 2005 / Rules and Regulations
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 210, 229, 240 and 249
[Release Nos. 33–8644; 34–52989; File No.
S7–08–05]
RIN 3235–AJ29
Revisions to Accelerated Filer
Definition and Accelerated Deadlines
for Filing Periodic Reports
Securities and Exchange
Commission.
ACTION: Final rule.
AGENCY:
bjneal on PROD1PC70 with RULES3
Table of Contents
We are adopting amendments
to the accelerated filing deadlines that
apply to periodic reports so that a ‘‘large
accelerated filer’’ (an Exchange Act
reporting company with a worldwide
market value of outstanding voting and
non-voting common equity held by nonaffiliates of $700 million or more) will
become subject to a 60-day Form 10–K
annual report filing deadline, beginning
with the annual report filed for its first
fiscal year ending on or after December
15, 2006. Until then, large accelerated
filers will remain subject to a 75-day
annual report deadline. Accelerated
filers will continue to file their Form
10–K annual reports under a 75-day
deadline, with no further reduction
scheduled to occur under the revised
rules. Accelerated filers and large
accelerated filers will continue to file
their Form 10–Q quarterly reports under
a 40-day deadline, rather than the 35day deadline that was scheduled to
apply next year under the previously
existing rules. Further, the amendments
revise the definition of the term
‘‘accelerated filer’’ to permit an
accelerated filer that has voting and
non-voting common equity held by nonaffiliates of less than $50 million to exit
accelerated filer status at the end of the
fiscal year in which its equity falls
below $50 million and to file its annual
report for that year and subsequent
periodic reports on a non-accelerated
basis. Finally, the amendments permit a
large accelerated filer that has voting
and non-voting common equity held by
non-affiliates of less than $500 million
to exit large accelerated filer status at
the end of the fiscal year in which its
equity falls below $500 million and to
file its annual report for that year and
subsequent periodic reports as an
accelerated filer, or a non-accelerated
filer, as appropriate.
DATES: Effective Date: December 27,
2005.
Compliance Dates: See Section III.D.
FOR FURTHER INFORMATION CONTACT:
Katherine W. Hsu, Special Counsel,
SUMMARY:
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Office of Rulemaking, at (202) 551–
3430, Division of Corporation Finance,
U.S. Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549.
SUPPLEMENTARY INFORMATION: We are
adopting amendments to Rules 3–01, 3–
09 and 3–12 1 of Regulation S–X,2 Item
101 3 of Regulation S–K,4 Forms 10–Q,
10–K and 20–F 5 under the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 6 and Exchange Act Rules 12b–2,
13a–10 and 15d–10.7
I. Background
II. Proposed Amendments
III. Discussion of Final Amendments We Are
Adopting Today
A. Amended Accelerated Filing Deadlines
for Annual Reports on Form 10–K and
Quarterly Reports on Form 10–Q
1. Deadlines for Accelerated Filers that Are
Not Large Accelerated Filers
2. Large Accelerated Filers
3. Form 10–K Deadline for Large
Accelerated Filers
4. Form 10–Q Deadline for Large
Accelerated Filers
5. Other Comments on the Amended Filing
Deadlines
B. Exit Requirements from Accelerated
Filer and Large Accelerated Filer Status
C. Other Amendments
D. Effective Date and Compliance Dates
IV. Paperwork Reduction Act
V. Cost-Benefit Analysis
A. Accelerated Filing Deadlines
1. Benefits
2. Costs
B. Exiting Accelerated Filer or Large
Accelerated Filer Status
VI. Consideration of Impact on the Economy,
Burden on Competition and Promotion
of Efficiency, Competition and Capital
Formation
VII. Final Regulatory Flexibility Analysis
A. Need for the Amendments
B. Significant Issues Raised by Public
Comment
C. Small Entities Subject to the Final
Amendments
D. Projected Reporting, Recordkeeping, and
Other Compliance Requirements
E. Agency Action to Minimize Effect on
Small Entities
VIII. Update to Codification of Financial
Reporting Policies
IX. Statutory Authority and Text of
Amendments
I. Background
The Commission first established the
accelerated filing deadlines for periodic
1 17 CFR 210.3–01; 17 CFR 210.3–09; and 17 CFR
210.3–12.
2 17 CFR 210.1–01 et seq.
3 17 CFR 229.101.
4 17 CFR 229.10 et seq.
5 17 CFR 249.308a; 17 CFR 249.310; and 17 CFR
249.220f.
6 15 U.S.C. 78a et seq.
7 17 CFR 240.12b–2; 17 CFR 240.13a–10; and 17
CFR 240.15d–10.
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reports filed by larger public companies
in September 2002.8 The rules provided
for a system of filing deadlines that
required companies meeting the
accelerated filer definition in Rule 12b–
2 of the Exchange Act to file their Form
10–K annual reports and Form 10–Q
quarterly reports under deadlines that
were shorter than the 90-day Form 10–
K and 45-day Form 10–Q deadlines that
previously applied to all companies
filing these forms. Accelerated filers
generally included companies with an
aggregate market value of voting and
non-voting common equity held by nonaffiliates 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.9 The definition of an
accelerated filer was based, in part, on
the requirements for registration of
primary offerings for cash on Form S–
3.10
The 2002 rules provided for a gradual
three-year phase-in period in order to
transition accelerated filers into filing
under shortened deadlines and to afford
companies and their auditors more time
to make the requisite adjustments to
their schedules to prepare for the new
deadlines.11 The rules ultimately would
have shortened the Form 10–K annual
report deadline to 60 days after fiscal
year end, and the Form 10–Q quarterly
report deadline to 35 days after fiscal
quarter end, for all accelerated filers.
Companies that did not meet the
Exchange Act definition of an
accelerated filer were permitted to
8 Release No. 33–8128 (Sept. 5, 2002) [67 FR
58480].
9 Under the accelerated filer rules, before today’s
adoption of the amendments, a company was an
accelerated filer once it met all of the following
conditions as of the end of its fiscal year:
• The issuer had an aggregate market value of
voting and non-voting common equity held by nonaffiliates of the issuer of $75 million or more, as of
the last business day of the issuer’s most recently
completed second fiscal quarter;
• The issuer had been subject to the reporting
requirements of Section 13(a) or 15(d) of the
Exchange Act [15 U.S.C. 78m(a) or 78o(d)] for a
period of at least 12 calendar months;
• The issuer previously had filed at least one
annual report; and
• The issuer was not eligible to use Forms 10–
KSB and 10–QSB [17 CFR 249.310b and 17 CFR
249.308b] for its annual and quarterly reports.
10 17 CFR 239.13. See Section II.B.3 in Release
No. 33–8128.
11 The phase-in schedule adopted in 2002
provided for a 75-day annual report deadline for
accelerated filers beginning with the annual report
filed for fiscal years ending on or after December
15, 2003 and before December 15, 2004, and a 40day quarterly report deadline for subsequently filed
quarterly reports. Under the 2002 schedule, a 60day annual report deadline was scheduled to be
implemented for annual reports filed for fiscal years
ending on or after December 15, 2004 and a 35-day
quarterly report deadline was to apply to
subsequently filed quarterly reports.
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Federal Register / Vol. 70, No. 247 / Tuesday, December 27, 2005 / Rules and Regulations
continue filing annual reports under a
90-day deadline and quarterly reports
under a 45-day deadline.
In the 2002 adopting release, we
stated our belief that periodic reports
filed under the Exchange Act contain
valuable information for investors, and
expressed concern that an undue delay
in making available the periodic report
information may cause the information
to be less valuable to investors.12 We
also acknowledged the need to balance
the demand for timely information to
investors with the time companies need
to prepare their reports without undue
burden. We further emphasized that the
amended filing deadlines should speed
the flow of information to investors
without sacrificing accuracy or
completeness or imposing undue
burden and expense on registrants.13
During the three-year phase-in period,
the accelerated filing deadlines have
remained a topic of discussion. In
particular, in year two of the phase-in
period, issuers and their auditors
expressed concern over their ability to
make the necessary preparations to file
reports on a timely basis, especially
given our adoption of new reporting and
attestation requirements regarding the
effectiveness of internal control over
financial reporting under Section 404 of
the Sarbanes-Oxley Act of 2002.14 Our
rules implementing Section 404 require
companies to include in their annual
reports a report of management on the
company’s effectiveness of internal
control over financial reporting and an
accompanying auditor’s report, and to
evaluate, as of the end of each fiscal
quarter,15 any change in the company’s
internal control over financial
reporting.16
We first acted in response to these
concerns in February 2004 when we
extended the Section 404 compliance
dates to require an accelerated filer to
begin complying with the internal
control over financial 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, 2004.17 Then, in
12 Section
II.A.1 in Release No. 33–8128.
13 Id.
14 15
U.S.C. 7262.
the case of a foreign private issuer filing on
Forms 20–F and 40–F [17 CFR 249.20f and 249.40f],
this evaluation is conducted as of the end of each
fiscal year.
16 Exchange Act Rules 13a–15 and 15d–15 [17
CFR 240.13a–15 and 17 CFR 240.15d–15] and Item
308 of Regulations S–K and S–B [17 CFR 229.308
and 17 CFR 228.308], as adopted in Release No. 33–
8238 (June 5, 2003) [68 FR 36636].
17 Release No. 33–8392 (Feb. 24, 2004) [69 FR
9722]. The compliance date for a company that is
not an accelerated filer has been extended until the
company files an annual report for its first fiscal
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15 In
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November 2004, we postponed the final
phase-in of the accelerated filing
deadlines for one year.18 As a result of
the postponement, prior to our action
today, the final phase-in of the
accelerated filing deadlines was
scheduled to occur beginning with
periodic filings made in 2006.
Specifically, accelerated filers were to
become subject to the 60-day deadline
beginning with their annual reports on
Form 10–K filed for fiscal years ending
on or after December 15, 2005, and to
the 35-day deadline for their
subsequently filed quarterly reports on
Form 10–Q.
II. Proposed Amendments
On September 22, 2005, we proposed
rule and form changes to the periodic
report filing deadlines and to the
Exchange Act Rule 12b–2 ‘‘accelerated
filer’’ definition.19 As noted in the
proposing release, the proposed
deadlines were consistent with a
recommendation adopted by the SEC
Advisory Committee on Smaller Public
Companies on August 10, 2005 that
smaller public companies not be made
subject to any further acceleration of
due dates for annual and quarterly
reports.20 The proposals also were
prompted by discussions and comments
provided at the Commission’s
roundtable on internal control over
financial reporting,21 comments related
to our release on the temporary
postponement of the final phase-in of
the accelerated filing deadlines,22 and
comments on our release proposing the
Securities Offering Reform rules.23
year ending on or after July 15, 2007. Release No.
33–8618 (Sept. 22, 2005) [70 FR 56825].
18 Release No. 33–8507 (Nov. 17, 2004) [69 FR
68232].
19 Release No. 33–8617 (Sept. 22, 2005) [70 FR
56862].
20 Materials related to the August 10, 2005
meeting held by the SEC Advisory Committee on
Smaller Public Companies are available on-line at
https://www.sec.gov/info/smallbus/acspc.shtml.
21 See, e.g., testimony from Bob Miles of
Washington Mutual and letters from Ernst & Young
LLP (‘‘E&Y’’) (Apr. 4, 2005); Glass Lewis & Co. (Apr.
12, 2005); and Crowe Chizek & Co. LLC (Mar. 28,
2005). Materials related to the roundtable, including
an archived broadcast and a transcript of the
roundtable are available on-line at https://
www.sec.gov/spotlight/soxcomp.htm. The
roundtable was held on April 13, 2005. See SEC
Press Release Nos. 2005–20 (Feb. 22, 2005) and
2005–50 (Apr. 7, 2005).
22 See, e.g., letters from the AICPA; Becker &
Poliakoff; P.A.; BDO Seidman, LLP (‘‘BDO
Seidman’’); The Chubb Corporation, Deloitte &
Touche LLP (‘‘Deloitte’’); E&Y; First Federal
Bancshares of Arkansas; Federal Signal
Corporation; Franklin Financial Services
Corporation; MBNA Corporation; Pfizer Inc.;
Protective Life Corporation; and Spectrum Organic
Products, submitted in response to Release No. 33–
8477 (Aug. 25, 2004) [69 FR 67392].
23 See, e.g., letters from the AICPA; BDO
Seidman; E&Y; and KPMG, submitted in response
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The proposals that we issued in
September of this year called for the
establishment of three, rather than two,
tiers of periodic report filing deadlines.
The proposals contemplated the
creation of a new ‘‘large accelerated
filer’’ category of Exchange Act
reporting companies to be comprised of
issuers having $700 million or more in
public float. As a related change, the
proposals would have revised the
‘‘accelerated filer’’ definition to include
issuers having $75 million or more, but
less than $700 million, in public float.
Under the proposals, the
contemplated large accelerated filers
were to be the only companies to remain
subject to the previously adopted final
phase-in of the accelerated filing
transition schedule requiring 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. The proposed revisions would
have permitted large accelerated filers to
continue to file their quarterly reports
on Form 10–Q within the same 40-day
deadline under which accelerated filers
have been filing these reports for the last
two years.
Under the proposals, the final phasein of accelerated deadlines would not
have applied to the middle tier of
companies, the accelerated filers. We
proposed to permit those companies to
continue to file their Form 10–K annual
reports within a 75-day deadline and
their Form 10–Q quarterly reports
within a 40-day deadline. The 75-day
and 40-day deadlines are the same
deadlines under which accelerated filers
have been filing their periodic reports
for the last two years.
The proposed revisions would not
have affected the filing deadlines of
non-accelerated filers. The proposing
release also confirmed that the
deadlines for foreign private issuers that
file annual reports on Form 20–F would
not be affected by the proposed
revisions.24
In addition, the proposals sought to
amend the requirements for exiting
accelerated filer status to permit an
accelerated filer that has a public float
of less than $25 million, as of the last
business day of its most recently
completed second fiscal quarter, to exit
accelerated filer status beginning with
the annual report for the fiscal year in
which the company’s public float
to Release No. 33–8501 (Nov. 3, 2004) [69 FR
71126].
24 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.
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dropped below $25 million. We
proposed to permit a company to exit
large accelerated filer status if its public
float fell below $75 million, as of the
last business day of its most recently
completed second fiscal quarter.
We received 46 comment letters on
the proposed revisions.25 More than half
of the comment letters were submitted
by companies. Other commenters
included professional and trade
associations, accounting firms, law
firms, a sole practitioner, one
institutional investor organization, the
Nasdaq stock market, and one
individual. A large majority of the
commenters supported the proposed
revisions to provide relief from the
previously adopted filing deadlines and
to maintain the Form 10–K annual
report deadline at 75 days and the Form
10–Q quarterly report deadline at 40
days for accelerated filers. A majority of
the commenters, however, urged the
Commission to consider revising the
rules further so that even the large
accelerated filers would not become
subject to the previously adopted 60-day
deadline for annual reports on Form 10–
K.
Some of the 46 comment letters also
discussed our proposed requirements
for exiting accelerated filer or large
accelerated filer status. Most of these
commenters supported our efforts to
make it easier for accelerated filers to
exit accelerated filer status, but many
offered recommendations for
modifications that would ease exit
restrictions further than proposed.
These comments are described in detail
below.
III. Discussion of Final Amendments
We Are Adopting Today
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After consideration of the public
comments that were received, we are
adopting the rules substantially as
proposed, but with two significant
modifications, which (1) provide large
accelerated filers with an additional
year before they are required to comply
with the 60-day Form 10–K deadline
and (2) relax the exit requirements from
accelerated filer or large accelerated filer
status further than proposed. We are
amending the periodic report filing
deadlines to:
• Create a new category of accelerated
filer, the ‘‘large accelerated filer,’’ that
encompasses an issuer after it first has
25 The public comments we received are available
for inspection in the Commission’s Public
Reference Room at 100 F Street, NE., Washington,
DC 20549 in File No. S7–08–05. They are also
available on-line at https://www.sec.gov/rules/
proposed/s70805.shtml.
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an aggregate worldwide market value 26
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; 27
• Re-define an ‘‘accelerated filer’’ as
an issuer after it first has an aggregate
worldwide market value of voting and
non-voting common equity held by nonaffiliates of the issuer 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;
• Amend the Form 10–K annual
report deadline for the newly
established category of large accelerated
filers so that they will be required to file
their annual reports under the 60-day
deadline beginning with the first annual
report filed for a fiscal year ending on
or after December 15, 2006 (until then,
they will remain subject to the 75-day
deadline);
• Eliminate the final phase-in of the
Form 10–Q quarterly report deadline for
large accelerated filers and thus
continue to apply a 40-day deadline to
the quarterly reports; and
• Eliminate the final phase-in of the
Form 10–K annual report deadline and
Form 10–Q quarterly report deadline for
the accelerated filers that are not large
accelerated filers and thus continue to
apply a 75-day and 40-day deadline to
the annual and quarterly reports,
respectively.
Further, we are amending the
requirements for exiting accelerated filer
or large accelerated filer status to:
• Permit an accelerated filer with less
than $50 million aggregate worldwide
market value of voting and non-voting
common equity held by its nonaffiliates, as of the last business day of
its most recently completed second
fiscal quarter, to exit accelerated filer
status without a second year’s
determination or other delay; 28 and
• Permit a large accelerated filer with
less than $500 million aggregate
worldwide market value of voting and
non-voting common equity held by its
non-affiliates, as of the last business day
of its most recently completed second
fiscal quarter, to exit large accelerated
26 As discussed later in this release, we are
modifying the Exchange Act Rule 12b–2 definition
of ‘‘accelerated filer’’ to refer to the issuer’s
‘‘aggregate worldwide market value’’ rather than
‘‘aggregate market value.’’ We also refer to this term
in the definition of ‘‘large accelerated filer.’’
27 See paragraph 2 of the Exchange Act Rule 12b–
2 definition of ‘‘accelerated filer and large
accelerated filer.’’
28 See paragraph 3(ii) of the Exchange Act Rule
12b–2 definition of ‘‘accelerated filer and large
accelerated filer.’’
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filer status.29 This filer would have to
comply with accelerated filer or nonaccelerated filer requirements
depending on whether its public float
was $50 million or more, or less than
$50 million, as of the last business day
of its most recently completed second
fiscal quarter.
A. Amended Accelerated Filing
Deadlines for Annual Reports on Form
10–K and Quarterly Reports on Form
10–Q
1. Deadlines for Accelerated Filers That
Are Not Large Accelerated Filers
An overwhelming majority of
commenters supported our proposal to
amend the filing deadlines so that
accelerated filers with a public float of
$75 million or more but less than $700
million, could continue to file their
annual reports on Form 10–K within 75
days after fiscal year end.30 Most
commenters also supported the
proposed amendments to maintain the
40-day deadline for quarterly reports on
Form 10–Q for accelerated filers and
large accelerated filers.31
We are adopting these amendments to
the accelerated filing deadlines as
proposed so that accelerated filers that
are not large accelerated filers will
become permanently subject to the 75day and 40-day deadlines, the deadlines
29 See paragraph 3(iii) of the Exchange Act Rule
12b–2 definition of ‘‘accelerated filer and large
accelerated filer.’’
30 See, e.g., letters from American Bar Association
(‘‘ABA’’); America’s Community Bankers (‘‘ACB’’);
Central Pacific Financial Corporation (‘‘Central
Pacific’’); The Chubb Corporation (‘‘Chubb’’);
Cogent Communications Group, Inc. (‘‘Cogent’’);
Commercial Metals Company (‘‘CMC’’);
Cytokinetics, Inc. (‘‘Cytokinetics’’); Deloitte (Oct.
31, 2005); Sean Dempsey; Emerson; E&Y; Ferrellgas
Partners, LP (‘‘Ferrellgas’’); Forest City Enterprises
(‘‘Forest City’’); Gander Mountain Company
(‘‘Gander’’); Glacier Bancorp, Inc. (‘‘Glacier’’);
General Motors Corporation (‘‘GM’’); Hercules
Incorporated (‘‘Hercules’’); Independent
Community Bankers of America (‘‘ICBA’’); J.C.
Penney Company, Inc. (‘‘JC Penney’’); KPMG; LNR
Property Holdings Ltd. (‘‘LNR Property’’); The
Nasdaq Stock Market, Inc. (‘‘Nasdaq’’); National
Retail Federation (‘‘NRF’’); Association of the Bar of
the City of New York (‘‘NYCBA’’); PwC; Safeway,
Inc. (‘‘Safeway’’); Sidley Austin Brown & Wood LLP
(‘‘Sidley Austin’’); Southwest Gas Corporation
(‘‘Southwest Gas’’); Greg Swalwell; Torchmark
Corporation (‘‘Torchmark’’); UnionBanCal
Corporation (‘‘UnionBanCal’’); URS Corporation
(‘‘URS’’); Vitria Technology, Inc. (‘‘Vitria’’); Von
Briesen & Roper, s.c.; Whole Foods Markets, Inc.
(‘‘Whole Foods’’); Williams-Sonoma, Inc.
(‘‘Williams-Sonoma’’); and Wilmington Trust
Company (‘‘Wilmington Trust’’).
31 See, e.g., letters from ABA; ACB; American
Bankers; The Business Roundtable; Central Pacific;
Chubb; CMC; Cytokinetics; Deloitte (Sept. 16, 2005
and Oct. 31, 2005); E&Y; Emerson; Financial
Executives International (‘‘FEI’’); Ferrellgas;
Financial Reporting Advisors, LLP (‘‘FinRA’’);
Gander; GM; Hercules; ICBA; KPMG; Southwest
Gas; Greg Swalwell; URS; Whole Foods; WilliamsSonoma; and Wilmington Trust.
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We did not propose to alter the
previously adopted 60-day Form 10–K
deadline for the largest accelerated
filers; instead, we proposed to create a
new group of accelerated filers called
‘‘large accelerated filers,’’ to which that
deadline would apply. We proposed to
define an issuer as a ‘‘large accelerated
filer’’ once it meets the following
conditions for the first time at its fiscal
year end:
• 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;
• The issuer has been subject to the
reporting requirements of Exchange Act
Section 13(a) or 15(d) 34 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 35 for its
annual and quarterly reports.
The comments that we received on
the proposed definition were mixed and
focused on the 60-day Form 10–K
deadline for these companies. Some
commenters supported the
establishment of this separate category
of companies and agreed with our
assertion that larger companies tend to
have access to additional resources and
a well-developed infrastructure, which
makes them better able to support the
further acceleration of the annual report
deadline.36 Many commenters,
however, disagreed that larger
companies are better able to comply
with accelerated filing deadlines and
pointed out that larger companies
frequently have more complex business
systems than smaller companies,
involving more complicated
transactions, and often have operations
that are geographically widespread.37 A
few commenters discouraged the use of
‘‘market float’’ or ‘‘size-based
differentiated requirements’’ among
issuers to determine filing deadlines.38
A few commenters, despite
disagreeing with the application of the
previously adopted 60-day Form 10–K
filing deadline for large accelerated
filers, said that they would support a
distinction between large accelerated
filers and other accelerated filers if the
Commission determined not to revise
the previously adopted 60-day
deadline.39 They agreed that the 60-day
Form 10–K annual report deadline
should not apply to issuers other than
large accelerated filers.
Some commenters suggested a
different public float threshold than the
proposed $700 million threshold.40
These commenters recommended that
we raise the threshold to some higher
amount (e.g., to $1 billion 41 or ‘‘to a
significantly higher level’’ than $700
million 42). One commenter who
supported the $700 million threshold
stated that, alternatively, we could
establish a threshold that would
fluctuate and be designed to capture
issuers representing 94% of total U.S.
market capitalization, given that issuers
that currently have a public float of
$700 million or more represent 94% of
the total U.S. market capitalization.43
None of these commenters provided
32 See Section V.A below on the cost-benefit
analysis of the filing deadline amendments.
33 See Section II.A.1 of Release No. 33–8591 (July
19, 2005) [70 FR 44722]. See also Section V of this
release. The Office of Economic Analysis provided
data indicating that the public float of companies
possessing between $75 and $700 million of public
float represented 4.3% of the total public float of
companies on NYSE, Amex, Nasdaq, the Over the
Counter Bulletin Board, and Pink Sheets, LLC.
These calculations were based on public float and
market capitalization measurements from 2004 and
2005.
34 15 U.S.C. 78m(a) or 78o(d).
35 17 CFR 249.310b and 17 CFR 249.308b.
36 See, e.g., letters from American Bankers; ACB;
Cogent; ICBA; and KPMG.
37 See, e.g., letters from Chubb; Emerson; Forest
City; Glacier; JC Penney; Safeway; Sidley Austin;
UnionBanCal; URS; and Whole Foods.
38 See, e.g., letters from NYCBA and Council of
Institutional Investors (‘‘CII’’).
39 See, e.g., letters from ABA; Deloitte (Oct. 31,
2005); and PricewaterhouseCoopers LLP (‘‘PwC’’).
40 See, e.g., letters from Cytokinetics; Deloitte
(Oct. 31, 2005); and Gander.
41 See letters from Cytokinetics and Gander.
42 See letter from Deloitte (Oct. 31, 2005).
43 See letter from American Bankers.
to which all accelerated filers have been
subject since their annual reports filed
for fiscal years ending on or after
December 15, 2003. After considering
the comments on this proposal, we
believe that it is appropriate to provide
relief to these smaller companies, given
the costs that might be incurred as a
result of the further acceleration of the
periodic report deadlines for these
companies. We have reason to believe
that the costs for these companies to
comply with the further acceleration of
their filing deadlines would be greater
than the compliance costs for larger
companies.32 The companies that
comprise the redefined category of
‘‘accelerated filers’’ comprise less than
5% of the total U.S. equity market
capitalization.33 We do not believe that
these costs would be justified by the
benefits that investors would obtain
from earlier access to the reports.
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2. Large Accelerated Filers
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empirical data to support a different
public float threshold.
One commenter was of the view that
we should not align the large
accelerated filer definition with that of
a well-known seasoned issuer, as
proposed, if we chose to create the large
accelerated filer category.44 This
commenter noted that, while many of
the Securities Offering Reform final
rules apply to both equity and debt-only
issuers, the accelerated filing deadlines
do not apply to issuers that have
registered only a class of debt securities
under the Exchange Act. On the other
hand, another commenter supported the
$700 million threshold and favored
consistency between the definition of a
well-known seasoned issuer and the
definition of a large accelerated filer.45
Another commenter suggested that we
consider further our initial decision not
to include debt-only issuers in the
accelerated filing system.46 This
commenter, along with others,47
thought that debt-only issuers should
only be allowed to file their periodic
reports on a non-accelerated basis if
they were willing to forgo the automatic
shelf registration benefits that they may
qualify for as well-known seasoned
issuers.
Although commenters raised several
issues and concerns that we considered,
we continue to believe that the
establishment of the new category of
large accelerated filers is appropriate.
While we acknowledge the concerns of
some commenters that larger issuers
may have more complex business
systems than smaller issuers that could
potentially cause them to experience
difficulties in meeting the most
accelerated Form 10–K deadline, we do
not believe that these observations
warrant granting larger issuers
permanent relief from the additional 15day acceleration of the Form 10–K
deadline. We believe that it is
appropriate to establish the large
accelerated filer category, noting that
companies with a public float of $700
million or more represent nearly 95% of
the U.S. equity market capitalization
and are more closely followed by the
markets and by securities analysts than
44 See
letter from PwC.
letter from American Bankers.
46 See letter from AICPA.
47 Two other commenters requested that the
Commission consider an ‘‘opt-in’’ or ‘‘opt-out’’
approach whereby large accelerated filers who
could qualify as a well-known seasoned issuer
could choose to opt-out of the benefits of automatic
shelf registration and instead file their annual
reports under a 75-day deadline. See letters from
ABA and E&Y.
45 See
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other issuers.48 Based on our experience
with the accelerated filing deadlines, we
continue to believe that larger issuers
generally have sufficient financial
reporting resources and sufficiently
robust infrastructures to comply with
the 60-day deadlines, when they take
effect for annual reports filed for fiscal
years ending on or after December 15,
2006.49 In addition, the $700 million
public float threshold that is an element
of the large accelerated filer definition
mirrors the public float eligibility
requirement used in the new Securities
Act of 1933 (‘‘Securities Act’’) 50
definition of ‘‘well-known seasoned
issuer.’’ 51
In using the same public float
threshold in both definitions, however,
we are not equating large accelerated
filer status with well-known seasoned
issuer status. As we noted in the
proposing release, the timing for
measuring an issuer’s public float for
the purpose of determining accelerated
filer or large accelerated filer status is
different from the timing for measuring
public float for the purpose of
determining well-known seasoned
issuer status. Moreover, debt-only
issuers are excluded from the category
of both accelerated filers and large
accelerated filers. In addition, unlike
with the large accelerated filer
definition, certain issuers known as
‘‘ineligible issuers’’ are excluded from
well-known seasoned issuer status, but
not from large accelerated filer status.52
An accelerated filer’s public float
threshold is to be measured as of the last
business day of the issuer’s most
recently completed second fiscal
quarter. We received some comments
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48 See
Section V.A below and Section II.A.1 in
Release No. 33–8591.
49 In addition, internal data suggests that
companies with a market capitalization of $700
million or more may currently be filing their annual
reports on Form 10–K on an average of 70 days after
fiscal year end. Our data was derived from Audit
Analytics. Market capitalization was used as an
approximation for public float data.
50 15 U.S.C. 77a et seq.
51 See Release No. 33–8591. The definition of a
well-known seasoned issuer is set forth in
Securities Act Rule 405 [17 CFR 230.405]. We chose
to incorporate the $700 million public float
threshold in connection with the extensive research
conducted by our Office of Economic Analysis
during the development of the Securities Offering
Reform rules and demonstrable differences between
companies with this threshold and those with a
lower public float threshold.
52 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 [17 CFR
240.3a51–1] during the three years before the
determination date specified in the ineligible issuer
definition, would not be eligible to become a wellknown seasoned issuer.
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recommending that the public float
measurement be tied to a longer period
of time or based on an average of
multiple dates instead of being tied to
a single point in time.53 These
commenters reasoned that
measurements required to be made at a
single point in time could cause
companies that are experiencing only
temporary swings in stock price at the
time that the public float is measured to
be pulled into the accelerated filer or
large accelerated filer definition.54
Commenters did not provide empirical
evidence that this is other than an
isolated occurrence.
We have considered the comments,
but continue to believe that the
proposed measurement, which is
consistent with the measurement that
has been in place since 2002, is an
appropriate method for the purpose of
accelerated filing. Further, our revisions
to the rules regarding exiting accelerated
filer status should address commenters’
concerns to some extent. As we stated
in the 2002 adopting release, when we
developed a fixed determination date in
advance of year-end in response to
comments, determining public float on
the last day of the company’s second
fiscal quarter provides a company with
six months advance notice as to whether
or not it will be subject to accelerated
filing at the end of its fiscal year so it
can begin making the appropriate
preparations.55 We have required
companies to disclose this computation
on the Form 10–K cover page. We are
not sufficiently persuaded that we
should change the method of computing
public float that was included in the
original accelerated filer definition that
we adopted in consideration of
comments in 2002.
In connection with our establishment
of the large accelerated filer category,
we also are amending the definition of
the term ‘‘accelerated filer’’ to include
only those companies that 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.
3. Form 10–K Deadline for Large
Accelerated Filers
A majority of commenters, mostly
companies and their auditors or
advisers or groups representing these
interests, urged the Commission to
consider revising the rules to eliminate
53 See, e.g., letters from ACB; BDO Seidman;
Deloitte (Oct. 31, 2005); PwC; and Greg Swalwell.
54 See, e.g., letter from ACB; BDO Seidman; and
Deloitte (Oct. 31, 2005).
55 See Section II.B3 of Release No. 33–8128.
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the final phase-in to the 60-day Form
10–K filing deadline for even the large
accelerated filers.56 These commenters
provided various reasons as to why the
Commission should revise this
deadline. First, several commenters
argued that the 60-day deadline would
negatively affect the quality of annual
reports.57 They suggested, for example,
that involvement of the audit
committee, board of directors, lawyers,
auditors, and outside experts in the
annual report review process could be
meaningfully reduced under the 60-day
deadline.58 Some commenters
cautioned that a shortened deadline
may increase the chance of error.59 One
commenter noted that issuers may have
an increased incentive to use recasted
language or limited analysis in the
Management’s Discussion and Analysis
section of the reports when pressured to
meet a rigid deadline.60 Second, some
commenters reasoned that companies’
more frequent filing of current reports
on Form 8–K,61 as well as the shortened
Form 8–K filing deadline, has reduced
the need for further acceleration of the
Form 10–K deadline.62 Third, a number
of commenters pointed out the
difficulties in meeting the accelerated
deadline given the time and costs
involved in complying with various
regulatory demands, including the
requirements regarding internal control
over financial reporting mandated by
Section 404 of the Sarbanes-Oxley Act
of 2002.63 In addition, commenters
claimed that the accelerated deadline
will increase costs without incremental
56 See, e.g., letters from ABA; AICPA; Central
Pacific; Chubb; CMC; Cytokinetics; Deloitte (Sept.
16, 2005 and Oct. 31, 2005); Sean Dempsey;
Emerson; E&Y; Ferrellgas; Forest City; Gander;
Glacier; GM; Hercules; JC Penney; LNR Property;
NRF; NYCBA; PwC; Safeway; Sidley Austin;
Southwest Gas; Greg Swalwell; Torchmark;
UnionBanCal; URS; Vitria; Whole Foods; WilliamsSonoma; and Wilmington Trust.
57 See, e.g., letters from ABA, AICPA; Central
Pacific; Chubb; CMC; Cytokinetics; Deloitte (Sept.
16, 2005 and Oct. 31, 2005); E&Y; Ferrellgas; Forest
City; Gander; Glacier; GM; Hercules; JC Penney;
LNR Property; NRF; NYCBA; PwC; Safeway; Sidley
Austin; Southwest Gas; Greg Swalwell; Torchmark;
UnionBanCal; URS; Vitria; Williams-Sonoma; and
Wilmington Trust.
58 See, e.g., letters from GM and Sidley Austin.
59 See, e.g., letters from Whole Foods and
Wilmington Trust.
60 See letter from Sidley Austin.
61 17 CFR 249.308.
62 See, e.g., letters from ABA; CMC; Cytokinetics;
Deloitte (Sept. 16, 2005 and Oct. 31, 2005); JC
Penney; GM; NRF; PwC; Safeway; Sidley Austin;
and Whole Foods.
63 See, e.g., letters from ABA; AICPA; BDO
Seidman; CMC; Deloitte (Sept. 16, 2005); Ferrellgas;
Forest City; Glacier; GM; Hercules; JC Penney; NRF;
Safeway; Sidley Austin; Greg Swalwell;
UnionBanCal; and Williams-Sonoma.
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respect to annual reports filed for fiscal
years ending on or after December 15,
2006, large accelerated filers will
become permanently subject to the 60day Form 10–K deadline.
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benefit,64 and some commenters
claimed that the deadline will impose
stress and strain on those responsible
for preparing the annual report.65 Some
companies provided timelines of the
tasks needed to be completed in
preparing the annual report in order to
show that they had little time to spare.66
A minority of commenters supported
the application of the final phase-in to
the 60-day Form 10–K filing deadline to
large accelerated filers.67 One
commenter provided empirical data
supporting its position. It analyzed 855
companies and noted that, while most
of the companies did not currently file
their Form 10–K within 60 days after
fiscal year end, more issuers filed them
within 60 days for their fiscal year 2004
than for their fiscal year 2002 and these
companies filed, on average, within 70
days after fiscal year end.68
Despite the comments requesting that
we consider adopting a permanent 75day annual report deadline for even the
large accelerated filers, we do not think
it is appropriate to do so. While the
information filed on Form 8–K current
reports clearly is important, we do not
believe that it is an adequate substitute
for the timely availability of the
information included in annual reports.
While we are mindful of the potential
costs that may be incurred by large
accelerated filers in complying with the
60-day Form 10–K filing deadline, for
the reasons discussed in 2002 at the
time of its original adoption, we believe
that the 60-day deadline continues to
appropriately balance, for these issuers,
the time necessary to prepare annual
reports on Form 10–K with the need of
the markets to receive important
information in a timely manner.
However, in acknowledgement of the
recent responsibilities assumed by even
the largest companies, especially those
associated with Section 404 of the
Sarbanes-Oxley Act and regarding
internal control over financial reporting,
we are postponing the implementation
of the 60-day Form 10–K deadline for
the large accelerated filers for an
additional year. Under the amendments
we are adopting, large accelerated filers
will be subject to the current 75-day
Form 10–K deadline for fiscal years
ending before December 15, 2006. With
A majority of the commenters
supported our proposal not to subject
even large accelerated filers to the final
phase-in for quarterly reports to 35 days
so that they could continue to file their
quarterly reports on Form 10–Q within
40 days after fiscal quarter end.69 One
association noted that this topic met
with the most concern among the
accelerated filers in its membership.70
Another commenter who supported the
60-day deadline for the Form 10–K for
large accelerated filers provided some
empirical data to show that a 35-day
deadline could hinder the quality of
management’s review as well as reduce
dialogue with the audit committee.71
Although we requested comment on
whether large accelerated filers should
be required to file their reports within
35 days, none of the commenters
responded affirmatively.
We are adopting the amendments as
proposed so that even large accelerated
filers will be subject to a 40-day Form
10–Q quarterly report deadline, instead
of the previously adopted 35-day
deadline. We proposed these
amendments based on comments that
we have received from the public about
the difficulties of meeting the 35-day
deadline. Consistent with the comments
that we have received on the proposal,
we believe that these amendments
appropriately relieve companies from
the further acceleration of the Form 10–
Q quarterly report deadline. Also, we do
not perceive a net benefit from
continuing to accelerate the Form 10–Q
for large accelerated filers, given the size
of the decrease in the number of filing
days (from 40 days to 35 days).72 We
believe that these amendments
appropriately balance the time needed
to prepare quarterly reports on Form
10–Q with the need of the markets to
receive the information in a timely
manner.
64 See, e.g., letters from BDO Seidman; CMC;
Deloitte (Sept. 16, 2005); Emerson; E&Y; Gander; JC
Penney; LNR Property; NRF; PwC; and Safeway.
65 See, e.g., letters from AICPA; Central Pacific;
Chubb; Sean Dempsey; GM; JC Penney; LNR
Property; PwC; Safeway; Sidley Austin; and
UnionBanCal.
66 See, e.g., letters from Chubb; Ferrellgas; GM;
and Southwest Gas.
67 See, e.g., letters from CII; FinRA; ICBA; KPMG;
and Nasdaq.
68 See letter from KPMG.
69 See, e.g., letters from ABA; ACB; American
Bankers; The Businees Roundtable; Central Pacific;
Chubb; CMC; Cytokinetics; Deloitte (Sept. 16, 2005
and Oct. 31, 2005); E&Y; Emerson; FEI; Ferrellgas;
FinRA; Gander; GM; Hercules; ICBA; KPMG;
Southwest Gas; Greg Swalwell; URS Corporations;
Whole Foods; William-Sonoma; and Wilmingron
Trust.
70 See letter from American Bankers.
71 See letter from KPMG.
72 See also Section V.A below on the cost-benefit
analysis of the filing deadline amendments.
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5. Other Comments on the Amended
Filing Deadlines
In the proposing release, we also
requested comment on whether:
• Alternate structures for filing
deadlines would be preferable;
• The filing deadlines should be
changed for any category of issuer;
• The filing deadlines would cause
confusion among investors; and
• The filing deadlines for accelerated
filers and non-accelerated filers that are
longer than the deadlines for large
accelerated filers would unduly
disadvantage investors in companies
that are not large accelerated filers.
Some commenters believed that the
three tiers of filing deadlines were too
complex and may be confusing to
investors.73 One commenter, however,
indicated that, while it thought that
three filer categories and sets of
deadlines were not necessary, it
suspected that the investor community
would adjust quickly to the deadlines.74
Another commenter requested that we
reconsider the longer deadlines for
companies that are not large accelerated
filers in the next two years, during
which time, technologies and
competency should improve allowing
shorter deadlines for all companies.75
Some commenters offered
recommendations for alternate
deadlines—for example, that nonaccelerated filers should be subject to
90-day annual report and 45-day
quarterly report deadlines while all
accelerated filers, even the larger ones,
should be subject to 75-day annual
report and 40-day quarterly report
deadlines.76 A few commenters
recommended that the Commission
uniformly apply 75-day annual report
and 40-day quarterly report deadlines to
all reporting companies, including those
with a public float below $75 million.77
One commenter noted in response to
our request for comment asking whether
the proposed deadlines would unduly
disadvantage investors in smaller
companies, that although it believed
that investors in smaller companies
would benefit from the earlier
availability of reports, such benefits are
not significant enough to justify the
costs associated with further
acceleration.78 A few commenters
suggested that the Commission conduct
73 See, e.g., letters from ACB; AICP; CII;
Ferrellgas; FRA; and NRF.
74 See letter from PwC.
75 See letter from CII.
76 See letter from BDO Seidman and E&Y.
77 See, e.g., letters from Emerson; LNR Property;
NYCBA; and Whole Foods.
78 See letter from PwC.
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further study on the appropriate
deadlines for companies.79
After considering all of these
comments, we continue to believe that
the three-tier structure, combined with
the provision of an additional year
before the phase-in of the 60-day
deadline for large accelerated filers,
appropriately balances differing
resources and needs of companies with
investor protection interests. Any
potential confusion that may be caused
initially by the changing deadlines
should be mitigated by the requirement
that a company check a box on the cover
pages of its Form 10–K and Form 10–
Q reports indicating whether it is a large
accelerated filer, an accelerated filer, or
a non-accelerated filer.
The following chart depicts the three
tiers of filing deadlines that will take
effect for the fiscal years ending on or
after December 15, 2005 80 as a result of
the amendments:
Revised deadlines for filing periodic reports
Category of filer
Form 10–Q deadline
Form 10–K deadline
Large Accelerated Filer ($700MM or more) ...........................
Accelerated Filer ($75MM or more and less than $700MM) ..
Non-accelerated Filer (less than $75MM) ..............................
75 days for fiscal years ending before December 15, 2006
and 60 days for fiscal years ending on or after December
15, 2006.
75 days ..................................................................................
90 days ..................................................................................
40 days.
40 days.
45 days.
B. Exit Requirements From Accelerated
Filer and Large Accelerated Filer Status
In addition to amending the filing
deadlines, we also are amending the
requirements for exiting accelerated filer
status and establishing requirements for
exiting large accelerated filer status.
Under the rules prior to the
amendments, an issuer that became an
accelerated filer would remain one
unless and until the issuer subsequently
became eligible to use Forms 10–KSB
and 10–QSB for its annual and quarterly
reports. Thus, a reporting issuer that
first met the ‘‘small business issuer’’
definition at the end of a fiscal year was
required to wait two years from that
point before it could begin to file its
annual report on a non-accelerated filer
basis.81
The proposed rules would have
amended the accelerated filer definition
to allow an issuer to exit accelerated
filer status at the end of the fiscal year
if its public float fell below $25 million,
as of the last business day of the most
recently completed second fiscal
quarter. The proposed amendments also
would have permitted a large
accelerated filer to exit large accelerated
filer status if its public float fell below
$75 million, as of the last business day
of the most recently completed second
fiscal quarter. Under the proposals, an
exiting large accelerated filer would
become a non-accelerated filer if its
public float had fallen below $25
million, as of the determination date.
In the proposing release, we noted
that there were circumstances under the
existing accelerated filer definition
where a company that no longer had
common equity securities outstanding,
and therefore no longer had a duty to
file periodic reports with respect to
these securities, but continued to have
a reporting obligation for another
security, was required to remain an
accelerated filer for two years. While the
instances in which a company no longer
would have publicly held common
equity securities but still would be
subject to an Exchange Act reporting
obligation with respect to another class
of non-common equity security
appeared to be uncommon, they may
have occurred occasionally in
connection with a stock merger or
leveraged buyout structured as a cash
merger or recapitalization.82 These
companies remained 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. The proposed revisions
sought to rectify this inequitable result.
Most of the commenters who
remarked on this proposal supported
removal of unnecessary impediments
preventing issuers from promptly
exiting out of accelerated filer status.
Many of these commenters, however,
offered recommendations for modifying
the proposals. These recommendations
included:
• Raising the public float threshold
that a company needs to meet before
exiting accelerated filer status; 83
• Raising the public float threshold so
that the threshold for exiting accelerated
filer status is the same as the threshold
for entering the status; 84
• Tying the public float measurement
to a period of time (e.g., 30 days) or
requiring the measurement to be based
on an average public float as measured
on multiple days (e.g., the average of
multiple quarter ends); 85 and
79 See, e.g., letter from Deloitte (Oct. 31, 2005) and
Forest City.
80 See Section III.D below.
81 For example, prior to these amendments, if an
issuer had met the accelerated filer definition at the
end of its 2004 fiscal year, the issuer would file its
2004 annual report on an accelerated filer basis.
However, in order to exit accelerated filer status, an
accelerated filer must have met the definition of
small business issuer and file on an accelerated filer
basis at the end of its 2004 and 2005 fiscal years,
before the prior rules would have allowed the
company to file on a non-accelerated filer basis
beginning with its first quarter Form 10–QSB in
fiscal 2006.
82 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.
83 See, e.g., letters from ABA and ACB.
84 See, e.g., letters from AICPA; Deloitte (Oct. 31,
2005); E&Y; FinRA; and PwC.
85 See, e.g., letters from BDO Seidman; Deloitte
(Oct. 31, 2005); FinRA; PwC; and Greg Swalwell.
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Also, as noted in the proposing
release, we do not intend to change the
deadlines for filing an annual report on
Form 20–F. However, the definition 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 for filing these
forms. A foreign private issuer that loses
its status as a foreign private issuer and
is, therefore, required to file reports on
Forms 10–K and 10–Q also must comply
with the applicable deadlines for filing
those forms.
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• Requiring companies to provide
notice, such as by filing a Form 8–K, of
a change in filing deadline status.86
A few commenters who
acknowledged the importance of
maintaining filing stability believed that
the objective could be achieved by tying
the measurement to a period of time
instead of to a single point in time, even
if the public float threshold were raised
higher than the proposed threshold.87
We are adopting the exit requirements
for accelerated filers and large
accelerated filers substantially as
proposed, except that we are raising the
public float thresholds below which a
large accelerated filer must fall before it
becomes eligible to exit that status from
the proposed $75 million to $500
million, and below which an
accelerated filer must fall before it
becomes eligible to exit that status from
the proposed $25 million public float to
a $50 million float. We are not
amending the method of computing
public float for the reasons set forth in
Section III.A.2 of this release. While we
considered the comments regarding the
filing of a Form 8–K announcing a
change in filing deadline status, and
while we considered whether to require
disclosure in a company’s Form 10–Q
for its second fiscal quarter to provide
investors with advance notice that a
company would be exiting accelerated
filer or large accelerated filer status, we
have decided that a mandated
disclosure requirement is not justified,
given the infrequency of such an
occurrence.88 As noted in Section III.C
above, we also believe that the cover
page notations on the Form 10–K and
Form 10–Q should mitigate any
potential initial investor confusion
regarding when a company’s reports are
due. Some companies may choose, on
their own, to disclose a change in filing
deadline status in a Form 8–K or Form
10–Q.
The revisions that we are adopting
allow an issuer to exit accelerated filer
status at the end of the fiscal year if its
aggregate worldwide market value of
voting and non-voting common equity
held by non-affiliates has fallen below
$50 million, as of the last business day
of its second fiscal quarter. As a result,
companies will be permitted to exit
accelerated filer status in the same year
that the public float measurement
reflects the requisite reduction. In
addition, companies that have lost their
public float but were required, under
86 See, e.g., letters from ACB; AICPA; E&Y;
FinRA; Nasdaq; and PwC.
87 See, e.g., letters from Deloitte (Oct. 31, 2005)
and PwC.
88 See text accompanying n.89 below.
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the previously existing rules, to
continue to file reports on an
accelerated basis because of a reporting
obligation with respect to a different
class of security will no longer need to
do so.
The proposals would have set the
requirement for exiting accelerated filer
status at $25 million due to the limited
following and reporting resources of a
public issuer with less than $25 million
in public float. After evaluating
comments, we are persuaded that
similar considerations apply upon a
reduction in a company’s public float to
below $50 million and therefore
conclude that it is appropriate to allow
these issuers to exit accelerated filer
status promptly. Also, available data
regarding the number of companies
whose market capitalization fell from
$75 million or more in 2004 to below
$50 million in 2005 suggests that only
a very limited number of companies
would move out of accelerated filer
status if the amendments that we are
adopting were in place at that time.89
We believe that this addresses our
concern that fluctuations in and out of
accelerated filer status may cause
confusion among investors about a
company’s filing deadlines.
As adopted, the rules provide that
once a large accelerated filer’s public
float falls below $500 million, as of the
last business day of the company’s most
recently completed second fiscal
quarter, it is eligible to exit large
accelerated filer status at the end of that
fiscal year and to file its annual report
as an accelerated filer or a nonaccelerated filer, as appropriate. If the
company’s public float is less than $500
million, but $50 million or more, as of
the last business day of its most recently
completed second fiscal quarter, the
company can begin to file under the
deadlines for an accelerated filer that is
not a large accelerated filer. If the
company’s public float drops below $50
million, as of the determination date, it
no longer will be required to file its
reports on an accelerated basis.
C. Other Amendments
We also are adopting other related
amendments. In the proposing release,
we proposed to make the same types of
conforming changes to Rules 3–01, 3–09
and 3–12 of Regulation S–X that we
89 We used market capitalization data as an
approximation for public float from the Thomson
Worldscope Global Database. The data shows that
only 11 companies with a market capitalization of
$700 million or more in 2004 had in 2005, its
market capitalization drop below $500 million, and
only 42 companies with a market capitalization of
$75 million or more in 2004 had in 2005, its market
capitalization drop below $50 million.
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made when we first adopted the
accelerated filing deadlines in 2002.90 In
the interest of creating uniform
requirements, our conforming
amendments 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.91
Second, we proposed to make similar
changes to the transition reports that a
company must make when it changes its
fiscal year.92 We are adopting those
changes as proposed.
We also proposed to clarify that the
public float term in both the accelerated
filer and large accelerated filer
definitions refers to the ‘‘aggregate
worldwide market value of the
company’s voting and non-voting
common equity held by nonaffiliates.’’ 93 We are adopting this
change as proposed. This reference also
is made in the note to the definition of
‘‘accelerated filer and large accelerated
filer’’ discussing how to calculate public
float. The amendment codifies staff
interpretation and is consistent with the
public float condition in the recently
adopted Securities Act Rule 405
definition of a ‘‘well-known seasoned
issuer,’’ as well as the public float
measurement for determining eligibility
to file a registration statement on Form
F–3.94 The determination of public float
is premised on the existence of a public
trading market for the company’s equity
securities.95
90 See
Release No. 33–8128.
CFR 210.3–01; 17 CFR 210.3–09; and 17 CFR
210.3–12.
92 See paragraph (j)(1) of Exchange Act Rules 13a–
10 and 15d–10.
93 See paragraph (1)(i) and paragraph (2)(i) of the
Exchange Act Rule 12b–2 definition of ‘‘accelerated
filer and large accelerated filer.’’
94 Securities Act Rule 405 definition of ‘‘wellknown seasoned issuer’’ refers to ‘‘worldwide
market value.’’ Notwithstanding the addition of
‘‘worldwide,’’ an issuer with common equity
securities publicly traded in foreign markets but not
subject to a requirement to file reports under
Section 13(a) or 15(d) of the Exchange Act related
to such securities (for example, an issuer with
common equity publicly traded in a foreign market
but not only required to report as a result of
registration or public issuance of one or more
classes of debt securities) will not be an accelerated
filer or a large accelerated filer. In addition,
regardless of their status, foreign private issuers that
file their annual reports on Form 20–F or 40–F are
of course not subject to the accelerated reporting
requirements that we adopt today.
95 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
91 17
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D. Effective Date and Compliance Dates
The revised accelerated filing
deadlines begin to apply to an
accelerated filer’s first annual report for
a fiscal year ending on or after
December 15, 2005, except that the final
phase-in of the 60-day Form 10–K
deadline for large accelerated filers is
postponed until the large accelerated
filer files its first annual report for its
fiscal year ending on or after December
15, 2006. The Commission finds good
cause to make the rule effective prior to
30 days after publication to enable
accelerated filers that satisfy the revised
requirements for exiting accelerated filer
status to file their Form 10–K annual
reports for fiscal year 2005, as discussed
below, on a non-accelerated basis. The
revised exit requirements are less
stringent than the requirements for
exiting accelerated filer status that had
been in place prior to revision. In
addition, because the revised deadlines
and revisions to the definition of an
accelerated filer relieve restrictions on
companies, we believe that it is
appropriate that the effective date of the
release is December 27, 2005.
Under the amendments, a company
that meets the Exchange Act definition
of a ‘‘large accelerated filer’’ at the end
of its fiscal year ending on or after
December 15, 2006 must comply with
the 60-day Form 10–K deadline
beginning with its annual report on
Form 10–K filed for that fiscal year.
With regard to the amended
requirements for exiting accelerated filer
status, a company that filed its last
quarterly report as an accelerated filer
and had an aggregate worldwide market
value of the voting and non-voting
common equity held by its non-affiliates
of less than $50 million, as of the last
business day of its most recently
completed second fiscal quarter, will no
longer be considered an accelerated
filer, as of the end of its fiscal year, and
may begin to file reports on a nonaccelerated basis, beginning with Form
10–K annual reports for fiscal years
ending on or after December 15, 2005.
IV. Paperwork Reduction Act
The amendments contain ‘‘collection
of information’’ requirements within the
meaning of the Paperwork Reduction
Act of 1995, or PRA.96 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
public trading market would not be an accelerated
filer or a large accelerated filer.
96 44 U.S.C. 3501 et seq.
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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.
The amendments to the Exchange Act
Rule 12b–2 definition of ‘‘accelerated
filer’’ and to the periodic reporting
deadlines will:
• 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;
• Re-define the term ‘‘accelerated
filer’’ to include 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 accelerated filers that
are not large accelerated filers can
continue to file their Form 10–K annual
reports within 75 days after fiscal year
end, with no further reduction
scheduled, while large accelerated filers
will be subject to the 60-day Form 10–
K annual report deadline beginning
with the fiscal years ending on or after
December 15, 2006. The final 35-day
Form 10–Q quarterly report phase-in
deadline will not be applied even to
large accelerated filers, and thus, the
quarterly report deadline for all
accelerated filers will remain at 40 days;
and
• Amend the accelerated filer
definition to allow accelerated filers
with less than $50 million in public
float to exit accelerated filer status
without a two-year delay and to allow
large accelerated filers with less than
$500 million public float to exit that
status.
The amendments do not change the
amount of information required to be
included in Exchange Act reports.
Therefore, they 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
Paperwork Reduction Act analysis was
contained in the proposing release, and
we received no comments addressing
this analysis.
V. Cost-Benefit Analysis
The 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. As
adopted, these rules generally required
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issuers with a public float of $75 million
or more, as of the last business day of
the issuer’s most recently completed
second fiscal quarter,97 to meet
shortened filing deadlines for their
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 are
adopting rule and form amendments
that:
• Create a new ‘‘large accelerated
filer’’ category that includes issuers with
$700 million or more in public float, as
of the last business day of the issuer’s
most recently completed second fiscal
quarter;
• Redefine the term ‘‘accelerated
filer’’ to include an issuer with $75
million or more, but less than $700
million in public float, as of the last
business day of the issuer’s most
recently completed second fiscal
quarter; 98
• Amend the accelerated filing
deadlines;
• Amend the requirements for exiting
accelerated filer status; and
• Establish similar requirements for
exiting large accelerated filer status.
In this section, we examine the costs
and benefits of the amendments. We
received 46 comment letters on the
proposed amendments. Some of these
comment letters discussed the costs and
benefits of the proposals. These
comments are described further below.
A. Accelerated Filing Deadlines
The previously adopted accelerated
filing transition schedule provided for a
final phase-in that would have required
all accelerated filers to file their Form
10–K annual reports within 60 days
after fiscal year end, with respect to a
fiscal year ending on or after December
15, 2005, and to file their subsequent
Form 10–Q quarterly reports within 35
days after quarter end. We are adopting
amendments to the accelerated filing
deadlines, substantially as proposed, to:
• Amend the Form 10–K deadline so
that accelerated filers that are not large
accelerated filers will be subject to a 75day Form 10–K deadline, rather than the
97 In addition, an issuer will not be an accelerated
filer unless it meets three other additional
conditions. A company will be deemed an
accelerated filer if, as of the end of its fiscal year,
the issuer had been subject to the requirements of
Section 13(a) or 15(d) of the Exchange Act for a
period of at least 12 calendar months; had filed at
least one annual report pursuant to Section 13(a) or
15(d) of the Exchange Act; and is not eligible to use
Forms 10–KSB and 10–QSB for its annual and
quarterly reports.
98 Other than the public float amount, the
conditions for the accelerated filer definition
remain the same.
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60-day deadline scheduled to take effect
next year, while large accelerated filers
will be subject to final phase-in of the
60-day Form 10–K deadline, beginning
with fiscal years ending on or after
December 15, 2006, and to a 75-day
Form 10–K deadline until then; and
• Eliminate the final phase-in of the
35-day Form 10–Q deadline for all
accelerated filers so that both large
accelerated filers and accelerated filers
will be permanently subject to a 40-day
Form 10–Q deadline.
1. Benefits
These amendments may afford
various benefits to companies and their
investors. Since the 2002 adoption of
the accelerated filing deadlines, we
received several comments expressing
concern over the ability of companies to
meet the accelerated filing deadlines,
especially 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. We interpret these
comments on companies’ limited ability
to meet more stringent deadlines as an
expression of concern about the costs to
companies of complying with the
shortened deadlines.
The primary benefit of the
amendments is the expected costsavings to companies that as a result of
the amendments will no longer be
subject to the final phase-in of the
accelerated Form 10–K or Form 10–Q
filing deadlines. In order to comply with
the final phase-in of the most
accelerated deadlines, companies may
devote or expend additional resources
to generate information more quickly
and provide the information to the
market. Smaller companies appear to
have access to fewer financial resources
and less well-developed infrastructure
to support the further acceleration of the
reporting deadlines. For a given
disclosure, diseconomies of scale may
cause smaller companies to face greater
costs of acceleration than larger
companies. The amendments may thus
confer benefits to smaller companies by
relieving them from the higher costs of
having to meet the final phase-in of
deadlines.
As noted in the cost-benefit analysis
included in our initial accelerated filing
release,99 additional time to prepare the
financial reports may lower preparation
costs and limit the internal resources
that must be committed to filing
periodic reports. As a result of our
99 See
Section IV.A of Release No. 33–8128.
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amendments, smaller companies may
therefore allocate those resources
towards other projects.
In addition, not subjecting accelerated
filers to the final phase-in of the
accelerated filing deadlines may reduce
the cost of capital of these companies.
Smaller companies may take this into
account when considering whether to
become a public reporting company.
There have been a number of
academic papers that have shown that
smaller companies face higher costs of
compliance per dollar of asset value
than do larger companies. For example,
after the implementation of Section 404,
the cost of completing the auditing
process rose dramatically.100 This rise
in audit fees is related to the size of the
company. When audit fees are scaled by
assets, there is a negative relationship
between the change in audit fees and
company size, indicating that smaller
companies have a higher cost of
compliance than larger companies.101
We believe that the elimination of the
final phase-in of the current deadlines
will likely result in a reduction in
compliance costs for smaller companies.
We also are adopting conforming
amendments relating 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. The
conforming amendments provide
additional time for affected companies
to update the financial statements that
must be included in their registration
statements and proxy or information
statements and promote consistency
among our rules. These conforming
amendments may indirectly promote
capital formation, because accelerated
filers will have more time before the
financial information in registration
statements become stale.
2. 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.102 With regard to the
deadline for Form 10–Q quarterly
reports filed by both large accelerated
filers and accelerated filers, and the
100 For example, see Susan Eldridge & Burch
Kealey, SOX Costs: Auditor attestation under
Section 404 (University of Nebraska at Omaha
Working Paper, 2005) and Paul Griffin & David
Long, An analysis of audit fees following the
passage of Sarbanes-Oxley (UC-Davis Working
Paper, 2005).
101 Id.
102 See, e.g., I. Qi, D. Wu & W. Haw, The
Incremental Information Content of SEC 10–K
Reports Filed under the EDGAR System, 15 J. of
Acctg., Auditing and Fin. 25–45 (2000).
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deadline for Form 10–K annual reports
filed by accelerated filers, our
amendments have the effect of delaying
access to periodic report information to
investors and to the capital markets
relative to the originally established
phase-in schedule. Information required
by Exchange Act reports may provide a
verification function against other
unofficial statements that companies
may have made. 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 will delay access to
information for making 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.
The Office of Economic Analysis
(‘‘OEA’’) 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 are affected by these
proposals. For the most part, the data is
based on a public float definition which
is highly correlated to our definition of
public float.103 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 these markets and 4.3%
of the total public float of these
103 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.
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companies on these markets. The
companies with a public float of over
$700 million represent approximately
18% of the total number of companies
on these markets and nearly 95% of the
total public float on these markets.104
We have used this information in
analyzing the cost of delaying the
information contained in periodic
reports which we expect to be higher on
a per share basis for investors in smaller
companies, and therefore the cost to
investors on a per share basis of
eliminating the final phase-in for
smaller companies may be greater than
the cost of such a step would be for
larger companies. A study shows that
smaller companies experience a larger
price impact on a per share basis on the
filing date than larger companies.105
However, because of the much smaller
overall market size of smaller
companies (i.e., large accelerated filers
in the aggregate have roughly 19 times
the market capitalization of other filers
in the aggregate), the per share impact
may overestimate the total dollar market
impact of investor reactions to periodic
filings. Larger companies are more
widely followed and have more
information available in the market.106
However, to the extent that periodic
filings for larger companies contain
information not theretofore in the
available mix of information, any per
share price impact has a greater market
impact. This consideration of market
impact explains our focus on
maintaining the final phase-in of the
annual report filing deadline at 60 days
for large accelerated filers.
While we recognize inherent
difficulties in the ability to quantify the
effect that, for example, the 15-day
delay in the filing of the annual report
by accelerated filers has on the market,
we believe that eliminating the final
phase-in of deadlines incorporates new
information on the balance between the
magnitude of the cost-savings for
smaller companies engaging in
regulatory compliance and the potential
cost of less timely information. Further,
104 In our Securities Offering Reform release,
Release No. 33–8591, 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. 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 wellknown seasoned issuers still provide us with a good
approximation for our purposes.
105 Paul Griffin, Got Information? Investor
Response to Form 10–K and Form 10–Q EDGAR
Filings, 8 Rev. of Acctg. Stud. 433 (2003).
106 See also Section II.A.1 of Release No. 33–8591.
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we do not perceive a net benefit of
continuing to accelerate the Form 10–Q
quarterly report deadline for large
accelerated filers given the size of the
decrease in the number of filing days
(i.e., from 40 days to 35 days). We did
not receive comments quantifying the
impact that the delay would have to the
market.
Some commenters suggested that the
impact of a 15-day delay would not be
significant, given that the enhanced
Form 8–K requirements have greatly
improved the timeliness and access of
information about Exchange Act
reporting companies to investors and
the markets.107 While we believe,
however, that the access to the
information in the current reports on
Form 8–K is an important method for
obtaining specified unquestionably or
presumptively material information
about these companies, that information
is not an adequate substitute for the
information provided in Exchange Act
periodic reports.
We received some comments
cautioning that a system of filing
deadlines composed of three-tiers and
based on size-based differentiations was
too complex and may confuse
investors.108 We have also received
comments that suggested that we
require companies to provide notice,
such as by filing a Form 8–K, of a
change in filing deadline status.109
Similarly, we acknowledge the concern
that the amendments may produce costs
as a result of requiring companies and
their investors to regularly monitor
public float levels to determine
companies’ filing deadlines.
We believe that these concerns are
addressed by the requirement that
companies indicate on the Form 10–K
or Form 10–Q cover page whether they
are a large accelerated filer, accelerated
filer or non-accelerated filer. We
recognize that investors may be
confused as to the delay in the filing of
information when a company exits out
of accelerated filer or large accelerated
filer status, because disclosure about the
change in status is not available until
the time of filing. We have not required
the filing of a Form 8–K, because we
believe that the requirement would be
overly burdensome, and our research
indicates that the number of companies
exiting filing deadline status in any
107 See, e.g., letters from ABA; CMC; Cytokinetics;
Deloitte (Sept. 16, 2005 and Oct. 31, 2005); GM; JC
Penney; NRF; PwC; Safeway; Sidley Austin; and
Whole Foods.
108 See, e.g., letters from ACB; AIPCPA; CII;
Ferrellgas; FRA; and NRF.
109 See, e.g., letters from ACB; AICPA; E&Y;
FinRA; Nasdaq; and PwC.
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given year would be limited.110
Companies, however, may choose to
mitigate investor confusion by
voluntarily disclosing changes in filing
deadline status in a Form 8–K current
report or Form 10–Q quarterly report.
They may have an incentive to provide
this disclosure if they are concerned
that the market may infer that the delay
in filing is due to a potential problem.
A number of commenters requested
that we consider revising the rules to
maintain the Form 10–K deadline at 75
days after fiscal year end, eliminating
the final phase-in of the most
accelerated 60-day deadline for even
large accelerated filers.111 After careful
consideration of these comments and
based, in large part, on information
indicating that larger issuers generally
possess the infrastructure and resources
to support further acceleration of the
annual report filing deadline, we have
decided not to eliminate the final phasein of the most accelerated annual report
deadline for large accelerated filers. We
expect that that the accelerated annual
report deadline for larger companies
meeting the definition of a large
accelerated filer promotes investor
protection by providing investors in
these companies with timely access to
important information.
However, the proposed rules have
been modified to defer the 60-day Form
10–K deadline for an additional year for
large accelerated filers. We are aiming to
provide companies and their auditors
more time to refine their processes, and
we believe that this may help diffuse the
costs that companies may be facing
because of the recent regulatory
demands combined with a further
accelerated annual report deadline. This
change should alleviate the impact in
compliance costs on companies caused
by the further accelerated annual report
deadline.
In sum, by establishing three tiers of
filing deadlines in which the largest
companies are subject to the shortest
annual report deadline, the amended
rules hasten the delivery of material
information to investors and capital
markets about those issuers that we
believe are more capable of meeting the
accelerated annual report deadline. At
the same time, we are incorporating an
additional one-year period before the
accelerated annual report deadline is
phased-in in order to address the
potential costs of complying with this
deadline.
110 See
111 See
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B. Exiting Accelerated Filer or Large
Accelerated Filer Status
We have also examined the costs and
benefits of the other amendments that
we are adopting today. Our amendments
to the requirements for exiting
accelerated filer status and large
accelerated filer status offer benefits
similar to our amendments lengthening
the accelerated filing deadlines. While
we continue to believe that it is
important to minimize fluctuation in
and out of accelerated filer status, we
identified some situations with respect
to which we believe the current rules
are 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. Prior to the adoption of
these amendments, this company would
still be required to 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 the amendment permitting
companies to exit accelerated filer status
based on a public float measurement
presents a more balanced approach than
what the current rules present.
It is difficult to quantify the number
of companies that will be affected by
our amendments relating to the exit of
issuers from accelerated filer status or
large accelerated filer status. However,
data available to us suggests that this
number will be very limited. The
amendments to the requirements on
exiting accelerated filing status, using
2003 data, could allow an estimated
four companies who have delisted their
stock or other common equity from a
national securities exchange or Nasdaq,
but have a reporting obligation with
regards to a different class of security,
to no longer be subject to the accelerated
filer definition and to be able to file
their Exchange Act reports up to 15 days
later than currently required.112 In
addition, using 2004 and 2005 data, our
112 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.
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research indicates that only 42
companies with $75 million or more
market capitalization in 2004 had their
market capitalization drop to less than
$50 million in 2005 and therefore would
have been eligible to exit accelerated
filer status if the amendment
requirements had been in place.113 With
regard to our provisions for exiting large
accelerated status, we also believe that
the number of companies exiting that
status would be few. Our research
indicates that only 11 companies with
$700 million or more market
capitalization in 2004 had their market
capitalization drop to below $500
million in 2005 and would have been
eligible to exit large accelerated filer
status if the amended requirements had
been in place.
VI. Consideration of Impact on the
Economy, Burden on Competition and
Promotion of Efficiency, Competition
and Capital Formation
Section 23(a)(2) of the Exchange
Act 114 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 115 and Section 3(f) of the Exchange
Act 116 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.
The amendments are designed to
balance the interest of providing timely
access of the information contained in
Exchange Act reports to investors and to
markets against the need of companies
along with 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. Our
amendment that incorporates the 60-day
deadline for large accelerated filers after
fiscal years ending on or after December
15, 2006 preserves the timeliness and
accessibility of issuer information so
that investors have more ready access to
113 In deriving these estimates, we used market
capitalization as an approximation for public float
from the Thomson Worldscope Global Database.
114 15 U.S.C. 78w(a)(2).
115 15 U.S.C. 77b(b).
116 15 U.S.C. 78c(f).
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information for investment and voting
decisions regarding these companies.
We believe that the 60-day deadline for
annual reports for large accelerated
filers, when it takes effect, is
appropriate, given the internal reporting
resources of large accelerated filers and
the greater market interest that they
generate. We are eliminating the
previously adopted final phase-in to the
35-day Form 10–Q quarterly report
deadline for both accelerated filers and
large accelerated filers and eliminating
the final phase-in to the 60-day Form
10–K annual report deadline for
accelerated filers that are not large
accelerated filers. Under the amended
rules, issuers with a public float that has
dropped below $50 million will be
allowed to exit accelerated filer status
promptly.
Informed investor decisions generally
promote market efficiency and capital
formation. Depending on a company’s
public float, the accelerated filer rules,
as amended, require different filing
deadlines. Companies that are large
accelerated filers will be required to file
under a further accelerated annual
report filing deadline beginning with
the fiscal years ending on or after
December 15, 2006, while the other
accelerated filers remain subject to the
same filing deadlines under which they
currently file their periodic reports.
Also, under the amended rules, some
companies will be permitted to exit
accelerated filer status more quickly and
easily than the current rules. These
results 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 those that can file later.
Some issuers have expressed concern
that accelerated periodic report filing
deadlines may affect their ability to
provide accurate and reliable
information and that it is increasingly
difficult to comply with accelerated
deadlines given various regulatory
demands, including requirements
associated with Section 404 of the
Sarbanes-Oxley Act.117 We have sought
to minimize these concerns by
amending the deadlines so that the
previously adopted final phase-in of the
annual report deadline will apply
beginning with the fiscal years ending
on or after December 15, 2006 to the
largest public issuers, which are likely
to have the greatest internal reporting
resources to support the deadline.
117 See
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Although many commenters urged that
we revise the rules even further to
maintain a permanent 75-day annual
report deadline for even the large
accelerated filers,118 we believe that
these rules, as we are adopting them,
appropriately balance the concerns of
these issuers with the interest in
providing investors with timely access
to important information.
On the other hand, permitting issuers
to file under the extended deadline
requirements 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.
Permitting a company to exit
accelerated filer status may do likewise.
Nevertheless, these provisions could
also promote capital formation, because
they diminish the risk that companies
would not be eligible for 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.
VII. Final Regulatory Flexibility
Analysis
This Final Regulatory Flexibility
Analysis, or FRFA, has been prepared in
accordance with the Regulatory
Flexibility Act.119 This FRFA involves
amendments to the rules and forms
under the Securities Act and the
Exchange Act that:
• Create a new ‘‘large accelerated
filer’’ category defined in the same
manner as the term accelerated filer but
includes an issuer with $700 million or
more in public float, as of the last
business day of the issuer’s most
recently completed second fiscal
quarter;
• Re-define the term ‘‘accelerated
filer’’ to include 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, as of
the last business day of the issuer’s most
recently completed second fiscal
quarter;
• Amend the accelerated filing
deadlines so that accelerated filers that
are not large accelerated filers will be
subject to a 75-day Form 10–K deadline
118 See
119 5
n.56 above.
U.S.C. 603.
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and a 40-day Form 10–Q deadline with
no further reductions scheduled. Large
accelerated filers will be subject to a 60day Form 10–K annual report deadline
beginning with the fiscal years ending
on or after December 15, 2006. The
Form 10–Q quarterly report deadline for
large accelerated filers will remain at 40
days;
• Amend the accelerated filer
definition to allow an accelerated filer
with less than $50 million in public
float to exit accelerated filer status at the
end of its fiscal year; and
• Amend the accelerated filer
definition to allow a large accelerated
filer with less than $500 million in
public float to exit large accelerated filer
status.
A. Need for the Amendments
The amendments seek to balance the
interests of investors and of 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
amendments relate to the acceleration of
deadlines for filing annual reports on
Form 10–K and quarterly report on
Form 10–Q.
While we 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 some of the
concerns expressed by several
companies regarding the further
acceleration of filing deadlines. As a
result, we adopt amendments that
subject only large accelerated filers to
the shortest annual report accelerated
filing deadline, which we believe is
achievable by these issuers without
undue cost and burden. In doing so, we
acknowledge the relative ability of
different issuers to support the
accelerated report deadlines. We also
are providing large accelerated filers
with an additional year to make the
necessary adjustments to prepare for the
further accelerated annual report
deadline. In adopting new rules
governing the exit from accelerated filer
status, we seek to achieve a more
streamlined, fair, and balanced set of
rules.
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B. Significant Issues Raised by Public
Comment
In the proposing release, we requested
comment on whether the proposed
amendments could have an effect that
we have not considered. We also
requested that commenters describe the
nature of any impact on small entities
and provide empirical data to support
the extent of the impact. We did not
receive any comments specifically
responding to that request.
C. Small Entities Subject to the Final
Amendments
For purposes of the Regulatory
Flexibility Act, Exchange Act Rule 0–
10(a) 120 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 business day of its most recent
fiscal year.
The amendments affect only the
Exchange Act reporting companies that
are defined by Exchange Act Rule 12b–
2, as amended, as ‘‘accelerated filers’’ or
‘‘large accelerated filers.’’ An issuer
becomes an accelerated filer once it first
meets the following conditions as of the
end of its fiscal year:
• The issuer has 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; 121
• 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 is defined as a large
accelerated filer in much the same way,
except that a large accelerated filer has
a public float of $700 million or more,
as of the last business day of the issuer’s
most recently completed second fiscal
quarter.
As we noted in the proposing release,
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
120 17
CFR 240.0–10(a).
purposes of the accelerated filer
definition, the issuer must compute the aggregate
worldwide 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.
121 For
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million and three had a market
capitalization greater than $700
million.122 Based on our research, we
did not expect the proposed
amendments to affect a substantial
number of small entities. We did not
receive comments addressing this
analysis, and we continue to believe
that the amendments do not
substantially affect small entities.
D. Projected Reporting, Recordkeeping,
and Other Compliance Requirements
Our amendments to the filing
deadlines for the Form 10–K annual
report and Form 10–Q quarterly reports
should not significantly affect smaller
entities. The amended rules affect the
deadlines of only (1) large accelerated
filers, which includes issuers with $700
million or more in public float, as of the
last business day of the most recently
completed second fiscal quarter, and (2)
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 business day
of the most recently completed second
fiscal quarter.123
Our amendments to the exit
requirements from accelerated filer
status could have an impact on a
company that becomes a small entity
after its public float has dropped below
$50 million. However, we do not expect
the impact of the amendments on small
entities to be significant, because we
expect that only a few accelerated filers
would become small entities each
year.124 For those that do, the
amendments streamline their exit from
accelerated filer status and make it
easier for them to begin filing their
reports under longer deadlines.
Specifically, under the amendments,
issuers no longer have to wait for two
years before they could start filing under
longer deadlines.
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E. Agency Action To Minimize Effect on
Small Entities
The Regulatory Flexibility Act directs
us to consider significant alternatives
that would accomplish our stated
objectives, while minimizing any
122 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.
123 We have noted before that the accelerated filer
deadlines have little, if any, effect on smaller
entities. See Release No. 33–8128.
124 Based on data from the Thomson Worldscope
Global Database, we estimate that only 42
companies had a public float of $75 million in
2004, but less than $50 million in 2005.
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significant adverse impact on small
entities. In connection with the
amendments, we have 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 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 other 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. The amendments likely will
have a favorable impact on smaller
entities as they permit more companies
to exit from accelerated status and
permit companies to exit from
accelerated status without the two-year
delay that the current rules require. We
have stated that the accelerated
deadlines will have little, if any, effect
on smaller entities.125 As a result of our
amendments, the effect on smaller
entities will likely be even further
reduced.
VIII. Update to Codification of
Financial Reporting Policies
The Commission amends 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 fiscal
years ending before December 15, 2006),
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
125 See
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‘‘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 (75
days for fiscal years ending before
December 15, 2006) 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 substitute 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 (75 days for
fiscal years ending before December 15,
2006) 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 (75
days for fiscal years ending before
December 15, 2006) of the end of its
fiscal year if the registrant is a large
accelerated filer (i.e., February 16 to
March 1 (or March 15 for fiscal years
ending before December 15, 2006) 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:
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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 130 days, if
the registrant is a large accelerated filer
or 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
(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 (75 days for
fiscal years ending before December 15,
2006) 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.
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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
Amendments
The amendments contained in this
document are being adopted 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 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.
I
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:
I
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:
I
§ 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
§ 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 (75 days for fiscal years
ending before December 15, 2006) for
large accelerated filers (as defined in
§ 240.12b–2 of this chapter);
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(ii) 75 days for accelerated filers (as
defined in § 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
§ 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.
I 3. Section 210.3–09 is amended by
revising paragraphs (b)(3) and (b)(4) to
read as follows:
§ 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 (75 days for fiscal years
ending before December 15, 2006) 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 (75 days for fiscal years
ending before December 15, 2006) 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.
*
*
*
*
*
I 4. Section 210.3–12 is amended by
revising paragraph (g) to read as follows:
§ 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
§ 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 (75 days for fiscal years
ending before December 15, 2006) for
large accelerated filers (as defined in
§ 240.12b–2 of this chapter);
(ii) 75 days for accelerated filers (as
defined in § 240.12b–2 of this chapter);
and
(iii) 90 days for all other registrants.
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Federal Register / Vol. 70, No. 247 / Tuesday, December 27, 2005 / Rules and Regulations
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:
I
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.
*
*
§ 229.101
*
*
*
[Amended]
6. Section 229.101 is amended by:
a. Revising the phrase ‘‘an accelerated
filer’’ in the introductory text of
paragraph (e) and in paragraph (e)(3) to
read ‘‘an accelerated filer or a large
accelerated filer’’; and
I b. Revising the phrase ‘‘450 Fifth
Street, NW’’ in paragraph (e)(2) to read
‘‘100 F Street, NE’’.
I
I
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:
I
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:
I
§ 240.12b–2
Definitions.
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*
*
*
*
*
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
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14:41 Dec 23, 2005
Jkt 208001
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 (§ 249.310b
and § 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 nonaccelerated filer becomes an accelerated
filer, or whether a non-accelerated filer
or accelerated filer becomes a large
accelerated filer, governs the deadlines
for 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 $50 million, as
of the last business day of the issuer’s
most recently completed second fiscal
quarter. An issuer making this
determination becomes a nonaccelerated 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
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Fmt 4701
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76641
the issuer was less than $500 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 $50
million or more, but less than $500
million, as of the last business day of
the issuer’s most recently completed
second fiscal quarter, the issuer
becomes an accelerated filer. If the
issuer’s aggregate worldwide market
value was less than $50 million, as of
the last business day of the issuer’s most
recently completed second fiscal
quarter, the issuer becomes a nonaccelerated 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 nonaccelerated filer, or a large accelerated
filer becomes an accelerated filer or a
non-accelerated filer, governs the
deadlines for 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.
*
*
*
*
*
I 9. Section 240.13a–10 is amended by
revising paragraph (j) to read as follows:
§ 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 (75 days for fiscal years
ending before December 15, 2006) for
large accelerated filers (as defined in
§ 240.12b–2);
(ii) 75 days for accelerated filers (as
defined in § 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 (§ 249.308a
or § 249.308b of this chapter), the
number of days shall be:
(i) 40 days for large accelerated filers
and accelerated filers (as defined in
§ 240.12b–2); and
(ii) 45 days for all other issuers.
*
*
*
*
*
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Federal Register / Vol. 70, No. 247 / Tuesday, December 27, 2005 / Rules and Regulations
10. Section 240.15d–10 is amended by
revising paragraph (j) to read as follows:
I
§ 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:
(i) 60 days (75 days for fiscal years
ending before December 15, 2006) for
large accelerated filers (as defined in
§ 240.12b–2);
(ii) 75 days for accelerated filers (as
defined in § 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 (§ 249.308a
or § 249.308b of this chapter), the
number of days shall be:
(i) 40 days for large accelerated filers
and accelerated filers (as defined in
§ 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:
I
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.
*
*
*
*
*
*
I 12. Section 249.308a is amended by
revising paragraph (a) to read as follows:
Securities and Exchange Commission
Note: The text of Form 10–K does not, and
this amendment will not, appear in the Code
of Federal Regulations.
Washington, D.C. 20549
United States
§ 249.308a Form 10–Q, for quarterly and
transition reports under sections 13 or 15(d)
of the Securities Exchange Act of 1934.
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Authority: 15 U.S.C. 78a et seq. and 7201
et seq.; and 18 U.S.C. 1350, unless otherwise
noted.
*
(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 § 240.13a–13 or
§ 240.15d–13 of this chapter. A
quarterly report on this form pursuant to
§ 240.13a–13 or § 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
§ 240.12b–2 of this chapter); and
(2) 45 days after the end of the fiscal
quarter for all other registrants.
*
*
*
*
*
I 13. Form 10–Q (referenced in
§ 249.308a) is amended by:
I a. Revising General Instruction A.1.;
and
I b. Revising the check box on the cover
page that starts ‘‘Indicate by check mark
whether the registrant is an accelerated
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14:41 Dec 23, 2005
Jkt 208001
*
*
*
*
(2) 75 days after the end of the fiscal
year covered by the report for
accelerated filers (as defined in
§ 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 § 240.13a–10
or § 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 SX (§§ 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.
I 15. Form 10–K (referenced in
§ 249.310) is amended by:
I a. Revising General Instruction A.;
I 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
I c. Revising Item 1B. of Part I.
The revisions read as follows:
United States
Form 10–Q
*
*
*
Securities and Exchange Commission
*
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 file . . . . Accelerated filer
. . . . Non-accelerated filer . . . .
*
*
*
*
*
14. Section 249.310 is revised to read
as follows:
I
§ 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 (75 days for
fiscal years ending before December 15,
2006) for large accelerated filers (as
defined in § 240.12b–2 of this chapter);
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Fmt 4701
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Washington, D.C. 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 (75 days for fiscal years
ending before December 15, 2006) 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
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Federal Register / Vol. 70, No. 247 / Tuesday, December 27, 2005 / Rules and Regulations
*
*
*
*
United States
Securities and Exchange Commission
*
*
*
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 . . . .
*
*
*
*
*
*
*
*
bjneal on PROD1PC70 with RULES3
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 (§ 240.12b–2 of
this chapter), or is a well-known seasoned
issuer as defined in Rule 405 of the Securities
Act (§ 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
VerDate Aug<31>2005
*
*
*
[Amended]
16. Form 20–F (referenced in
§ 249.220f) is amended by:
I 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
I 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.
*
Part I
*
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 (§ 240.12b–2 of
this chapter), or is a well-known seasoned
issuer as defined in Rule 405 of the Securities
Act (§ 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.
*
I
Form 10–K
*
accelerated filer’’ in Rule 12b–2 of the
Exchange Act. (Check one):
Large accelerated filer . . . . Accelerated
filer . . . . Non-accelerated filer . . . .
§ 249.220f
Washington, D.C. 20549
*
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.
*
required by Article 12 of Regulation S-X (17
CFR 210.12–01–210.12–29) 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.
*
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76643
United States
Securities and Exchange Commission
Washington, D.C. 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
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*
*
*
*
*
*
*
*
*
Part 1
*
*
*
*
*
*
Dated: December 21, 2005.
By the Commission.
Jonathan G. Katz,
Secretary.
[FR Doc. 05–24479 Filed 12–23–05; 8:45 am]
BILLING CODE 8010–01–P
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Agencies
[Federal Register Volume 70, Number 247 (Tuesday, December 27, 2005)]
[Rules and Regulations]
[Pages 76626-76643]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-24479]
[[Page 76625]]
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Part III
Securities and Exchange Commission
-----------------------------------------------------------------------
17 CFR Parts 210, 229, 240 and 249
Revisions to Accelerated Filer Definition and Accelerated Deadlines for
Filing Periodic Reports; Final Rule
Federal Register / Vol. 70 , No. 247 / Tuesday, December 27, 2005 /
Rules and Regulations
[[Page 76626]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210, 229, 240 and 249
[Release Nos. 33-8644; 34-52989; 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: Final rule.
-----------------------------------------------------------------------
SUMMARY: We are adopting amendments to the accelerated filing deadlines
that apply to periodic reports so that a ``large accelerated filer''
(an Exchange Act reporting company with a worldwide market value of
outstanding voting and non-voting common equity held by non-affiliates
of $700 million or more) will become subject to a 60-day Form 10-K
annual report filing deadline, beginning with the annual report filed
for its first fiscal year ending on or after December 15, 2006. Until
then, large accelerated filers will remain subject to a 75-day annual
report deadline. Accelerated filers will continue to file their Form
10-K annual reports under a 75-day deadline, with no further reduction
scheduled to occur under the revised rules. Accelerated filers and
large accelerated filers will continue to file their Form 10-Q
quarterly reports under a 40-day deadline, rather than the 35-day
deadline that was scheduled to apply next year under the previously
existing rules. Further, the amendments 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
$50 million to exit accelerated filer status at the end of the fiscal
year in which its equity falls below $50 million and to file its annual
report for that year and subsequent periodic reports on a non-
accelerated basis. Finally, the amendments permit a large accelerated
filer that has voting and non-voting common equity held by non-
affiliates of less than $500 million to exit large accelerated filer
status at the end of the fiscal year in which its equity falls below
$500 million and to file its annual report for that year and subsequent
periodic reports as an accelerated filer, or a non-accelerated filer,
as appropriate.
DATES: Effective Date: December 27, 2005.
Compliance Dates: See Section III.D.
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.
SUPPLEMENTARY INFORMATION: We are adopting amendments to Rules 3-01, 3-
09 and 3-12 \1\ of Regulation S-X,\2\ Item 101 \3\ of Regulation S-
K,\4\ Forms 10-Q, 10-K and 20-F \5\ under the Securities Exchange Act
of 1934 (``Exchange Act'') \6\ and Exchange Act Rules 12b-2, 13a-10 and
15d-10.\7\
---------------------------------------------------------------------------
\1\ 17 CFR 210.3-01; 17 CFR 210.3-09; and 17 CFR 210.3-12.
\2\ 17 CFR 210.1-01 et seq.
\3\ 17 CFR 229.101.
\4\ 17 CFR 229.10 et seq.
\5\ 17 CFR 249.308a; 17 CFR 249.310; and 17 CFR 249.220f.
\6\ 15 U.S.C. 78a et seq.
\7\ 17 CFR 240.12b-2; 17 CFR 240.13a-10; and 17 CFR 240.15d-10.
---------------------------------------------------------------------------
Table of Contents
I. Background
II. Proposed Amendments
III. Discussion of Final Amendments We Are Adopting Today
A. Amended Accelerated Filing Deadlines for Annual Reports on
Form 10-K and Quarterly Reports on Form 10-Q
1. Deadlines for Accelerated Filers that Are Not Large
Accelerated Filers
2. Large Accelerated Filers
3. Form 10-K Deadline for Large Accelerated Filers
4. Form 10-Q Deadline for Large Accelerated Filers
5. Other Comments on the Amended Filing Deadlines
B. Exit Requirements from Accelerated Filer and Large
Accelerated Filer Status
C. Other Amendments
D. Effective Date and Compliance Dates
IV. Paperwork Reduction Act
V. Cost-Benefit Analysis
A. Accelerated Filing Deadlines
1. Benefits
2. Costs
B. Exiting Accelerated Filer or Large Accelerated Filer Status
VI. Consideration of Impact on the Economy, Burden on Competition
and Promotion of Efficiency, Competition and Capital Formation
VII. Final Regulatory Flexibility Analysis
A. Need for the Amendments
B. Significant Issues Raised by Public Comment
C. Small Entities Subject to the Final Amendments
D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
E. Agency Action to Minimize Effect on Small Entities
VIII. Update to Codification of Financial Reporting Policies
IX. Statutory Authority and Text of Amendments
I. Background
The Commission first established the accelerated filing deadlines
for periodic reports filed by larger public companies in September
2002.\8\ The rules provided for a system of filing deadlines that
required companies meeting the accelerated filer definition in Rule
12b-2 of the Exchange Act to file their Form 10-K annual reports and
Form 10-Q quarterly reports under deadlines that were shorter than the
90-day Form 10-K and 45-day Form 10-Q deadlines that previously applied
to all companies filing these forms. Accelerated filers generally
included companies with 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.\9\
The definition of an accelerated filer was based, in part, on the
requirements for registration of primary offerings for cash on Form S-
3.\10\
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\8\ Release No. 33-8128 (Sept. 5, 2002) [67 FR 58480].
\9\ Under the accelerated filer rules, before today's adoption
of the amendments, a company was an accelerated filer once it met
all of the following conditions as of the end of its fiscal year:
The issuer had an aggregate market value of voting and
non-voting common equity held by non-affiliates of the issuer of $75
million or more, as of the last business day of the issuer's most
recently completed second fiscal quarter;
The issuer had been subject to the reporting
requirements of Section 13(a) or 15(d) of the Exchange Act [15
U.S.C. 78m(a) or 78o(d)] for a period of at least 12 calendar
months;
The issuer previously had filed at least one annual
report; and
The issuer was not eligible to use Forms 10-KSB and 10-
QSB [17 CFR 249.310b and 17 CFR 249.308b] for its annual and
quarterly reports.
\10\ 17 CFR 239.13. See Section II.B.3 in Release No. 33-8128.
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The 2002 rules provided for a gradual three-year phase-in period in
order to transition accelerated filers into filing under shortened
deadlines and to afford companies and their auditors more time to make
the requisite adjustments to their schedules to prepare for the new
deadlines.\11\ The rules ultimately would have shortened the Form 10-K
annual report deadline to 60 days after fiscal year end, and the Form
10-Q quarterly report deadline to 35 days after fiscal quarter end, for
all accelerated filers. Companies that did not meet the Exchange Act
definition of an accelerated filer were permitted to
[[Page 76627]]
continue filing annual reports under a 90-day deadline and quarterly
reports under a 45-day deadline.
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\11\ The phase-in schedule adopted in 2002 provided for a 75-day
annual report deadline for accelerated filers beginning with the
annual report filed for fiscal years ending on or after December 15,
2003 and before December 15, 2004, and a 40-day quarterly report
deadline for subsequently filed quarterly reports. Under the 2002
schedule, a 60-day annual report deadline was scheduled to be
implemented for annual reports filed for fiscal years ending on or
after December 15, 2004 and a 35-day quarterly report deadline was
to apply to subsequently filed quarterly reports.
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In the 2002 adopting release, we stated our belief that periodic
reports filed under the Exchange Act contain valuable information for
investors, and expressed concern that an undue delay in making
available the periodic report information may cause the information to
be less valuable to investors.\12\ We also acknowledged the need to
balance the demand for timely information to investors with the time
companies need to prepare their reports without undue burden. We
further emphasized that the amended filing deadlines should speed the
flow of information to investors without sacrificing accuracy or
completeness or imposing undue burden and expense on registrants.\13\
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\12\ Section II.A.1 in Release No. 33-8128.
\13\ Id.
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During the three-year phase-in period, the accelerated filing
deadlines have remained a topic of discussion. In particular, in year
two of the phase-in period, issuers and their auditors expressed
concern over their ability to make the necessary preparations to file
reports on a timely basis, especially given our adoption of new
reporting and attestation requirements regarding the effectiveness of
internal control over financial reporting under Section 404 of the
Sarbanes-Oxley Act of 2002.\14\ Our rules implementing Section 404
require companies to include in their annual reports a report of
management on the company's effectiveness of internal control over
financial reporting and an accompanying auditor's report, and to
evaluate, as of the end of each fiscal quarter,\15\ any change in the
company's internal control over financial reporting.\16\
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\14\ 15 U.S.C. 7262.
\15\ In the case of a foreign private issuer filing on Forms 20-
F and 40-F [17 CFR 249.20f and 249.40f], this evaluation is
conducted as of the end of each fiscal year.
\16\ Exchange Act Rules 13a-15 and 15d-15 [17 CFR 240.13a-15 and
17 CFR 240.15d-15] and Item 308 of Regulations S-K and S-B [17 CFR
229.308 and 17 CFR 228.308], as adopted in Release No. 33-8238 (June
5, 2003) [68 FR 36636].
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We first acted in response to these concerns in February 2004 when
we extended the Section 404 compliance dates to require an accelerated
filer to begin complying with the internal control over financial
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.\17\ Then, in November 2004, we postponed the final
phase-in of the accelerated filing deadlines for one year.\18\ As a
result of the postponement, prior to our action today, the final phase-
in of the accelerated filing deadlines was scheduled to occur beginning
with periodic filings made in 2006. Specifically, accelerated filers
were to become subject to the 60-day deadline beginning with their
annual reports on Form 10-K filed for fiscal years ending on or after
December 15, 2005, and to the 35-day deadline for their subsequently
filed quarterly reports on Form 10-Q.
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\17\ Release No. 33-8392 (Feb. 24, 2004) [69 FR 9722]. The
compliance date for a company that is not an accelerated filer has
been extended until the company files an annual report for its first
fiscal year ending on or after July 15, 2007. Release No. 33-8618
(Sept. 22, 2005) [70 FR 56825].
\18\ Release No. 33-8507 (Nov. 17, 2004) [69 FR 68232].
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II. Proposed Amendments
On September 22, 2005, we proposed rule and form changes to the
periodic report filing deadlines and to the Exchange Act Rule 12b-2
``accelerated filer'' definition.\19\ As noted in the proposing
release, the proposed deadlines were consistent with a recommendation
adopted by the SEC Advisory Committee on Smaller Public Companies on
August 10, 2005 that smaller public companies not be made subject to
any further acceleration of due dates for annual and quarterly
reports.\20\ The proposals also were prompted by discussions and
comments provided at the Commission's roundtable on internal control
over financial reporting,\21\ comments related to our release on the
temporary postponement of the final phase-in of the accelerated filing
deadlines,\22\ and comments on our release proposing the Securities
Offering Reform rules.\23\
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\19\ Release No. 33-8617 (Sept. 22, 2005) [70 FR 56862].
\20\ Materials related to the August 10, 2005 meeting held by
the SEC Advisory Committee on Smaller Public Companies are available
on-line at https://www.sec.gov/info/smallbus/acspc.shtml.
\21\ See, e.g., testimony from Bob Miles of Washington Mutual
and letters from Ernst & Young LLP (``E&Y'') (Apr. 4, 2005); Glass
Lewis & Co. (Apr. 12, 2005); and Crowe Chizek & Co. LLC (Mar. 28,
2005). Materials related to the roundtable, including an archived
broadcast and a transcript of the roundtable are available on-line
at https://www.sec.gov/spotlight/soxcomp.htm. The roundtable was held
on April 13, 2005. See SEC Press Release Nos. 2005-20 (Feb. 22,
2005) and 2005-50 (Apr. 7, 2005).
\22\ See, e.g., letters from the AICPA; Becker & Poliakoff;
P.A.; BDO Seidman, LLP (``BDO Seidman''); The Chubb Corporation,
Deloitte & Touche LLP (``Deloitte''); E&Y; First Federal Bancshares
of Arkansas; Federal Signal Corporation; Franklin Financial Services
Corporation; MBNA Corporation; Pfizer Inc.; Protective Life
Corporation; and Spectrum Organic Products, submitted in response to
Release No. 33-8477 (Aug. 25, 2004) [69 FR 67392].
\23\ See, e.g., letters from the AICPA; BDO Seidman; E&Y; and
KPMG, submitted in response to Release No. 33-8501 (Nov. 3, 2004)
[69 FR 71126].
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The proposals that we issued in September of this year called for
the establishment of three, rather than two, tiers of periodic report
filing deadlines. The proposals contemplated the creation of a new
``large accelerated filer'' category of Exchange Act reporting
companies to be comprised of issuers having $700 million or more in
public float. As a related change, the proposals would have revised the
``accelerated filer'' definition to include issuers having $75 million
or more, but less than $700 million, in public float.
Under the proposals, the contemplated large accelerated filers were
to be the only companies to remain subject to the previously adopted
final phase-in of the accelerated filing transition schedule requiring
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. The
proposed revisions would have permitted large accelerated filers to
continue to file their quarterly reports on Form 10-Q within the same
40-day deadline under which accelerated filers have been filing these
reports for the last two years.
Under the proposals, the final phase-in of accelerated deadlines
would not have applied to the middle tier of companies, the accelerated
filers. We proposed to permit those companies to continue to file their
Form 10-K annual reports within a 75-day deadline and their Form 10-Q
quarterly reports within a 40-day deadline. The 75-day and 40-day
deadlines are the same deadlines under which accelerated filers have
been filing their periodic reports for the last two years.
The proposed revisions would not have affected the filing deadlines
of non-accelerated filers. The proposing release also confirmed that
the deadlines for foreign private issuers that file annual reports on
Form 20-F would not be affected by the proposed revisions.\24\
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\24\ 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.
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In addition, the proposals sought to amend the requirements for
exiting accelerated filer status to permit an accelerated filer that
has a public float of less than $25 million, as of the last business
day of its most recently completed second fiscal quarter, to exit
accelerated filer status beginning with the annual report for the
fiscal year in which the company's public float
[[Page 76628]]
dropped below $25 million. We proposed to permit a company to exit
large accelerated filer status if its public float fell below $75
million, as of the last business day of its most recently completed
second fiscal quarter.
We received 46 comment letters on the proposed revisions.\25\ More
than half of the comment letters were submitted by companies. Other
commenters included professional and trade associations, accounting
firms, law firms, a sole practitioner, one institutional investor
organization, the Nasdaq stock market, and one individual. A large
majority of the commenters supported the proposed revisions to provide
relief from the previously adopted filing deadlines and to maintain the
Form 10-K annual report deadline at 75 days and the Form 10-Q quarterly
report deadline at 40 days for accelerated filers. A majority of the
commenters, however, urged the Commission to consider revising the
rules further so that even the large accelerated filers would not
become subject to the previously adopted 60-day deadline for annual
reports on Form 10-K.
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\25\ The public comments we received are available for
inspection in the Commission's Public Reference Room at 100 F
Street, NE., Washington, DC 20549 in File No. S7-08-05. They are
also available on-line at https://www.sec.gov/rules/proposed/
s70805.shtml.
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Some of the 46 comment letters also discussed our proposed
requirements for exiting accelerated filer or large accelerated filer
status. Most of these commenters supported our efforts to make it
easier for accelerated filers to exit accelerated filer status, but
many offered recommendations for modifications that would ease exit
restrictions further than proposed. These comments are described in
detail below.
III. Discussion of Final Amendments We Are Adopting Today
After consideration of the public comments that were received, we
are adopting the rules substantially as proposed, but with two
significant modifications, which (1) provide large accelerated filers
with an additional year before they are required to comply with the 60-
day Form 10-K deadline and (2) relax the exit requirements from
accelerated filer or large accelerated filer status further than
proposed. We are amending the periodic report filing deadlines to:
Create a new category of accelerated filer, the ``large
accelerated filer,'' that encompasses an issuer after it first has an
aggregate worldwide market value \26\ 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; \27\
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\26\ As discussed later in this release, we are modifying the
Exchange Act Rule 12b-2 definition of ``accelerated filer'' to refer
to the issuer's ``aggregate worldwide market value'' rather than
``aggregate market value.'' We also refer to this term in the
definition of ``large accelerated filer.''
\27\ See paragraph 2 of the Exchange Act Rule 12b-2 definition
of ``accelerated filer and large accelerated filer.''
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Re-define an ``accelerated filer'' as an issuer after it
first has an aggregate worldwide market value of voting and non-voting
common equity held by non-affiliates of the issuer 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;
Amend the Form 10-K annual report deadline for the newly
established category of large accelerated filers so that they will be
required to file their annual reports under the 60-day deadline
beginning with the first annual report filed for a fiscal year ending
on or after December 15, 2006 (until then, they will remain subject to
the 75-day deadline);
Eliminate the final phase-in of the Form 10-Q quarterly
report deadline for large accelerated filers and thus continue to apply
a 40-day deadline to the quarterly reports; and
Eliminate the final phase-in of the Form 10-K annual
report deadline and Form 10-Q quarterly report deadline for the
accelerated filers that are not large accelerated filers and thus
continue to apply a 75-day and 40-day deadline to the annual and
quarterly reports, respectively.
Further, we are amending the requirements for exiting accelerated
filer or large accelerated filer status to:
Permit an accelerated filer with less than $50 million
aggregate worldwide market value of voting and non-voting common equity
held by its non-affiliates, as of the last business day of its most
recently completed second fiscal quarter, to exit accelerated filer
status without a second year's determination or other delay; \28\ and
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\28\ See paragraph 3(ii) of the Exchange Act Rule 12b-2
definition of ``accelerated filer and large accelerated filer.''
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Permit a large accelerated filer with less than $500
million aggregate worldwide market value of voting and non-voting
common equity held by its non-affiliates, as of the last business day
of its most recently completed second fiscal quarter, to exit large
accelerated filer status.\29\ This filer would have to comply with
accelerated filer or non-accelerated filer requirements depending on
whether its public float was $50 million or more, or less than $50
million, as of the last business day of its most recently completed
second fiscal quarter.
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\29\ See paragraph 3(iii) of the Exchange Act Rule 12b-2
definition of ``accelerated filer and large accelerated filer.''
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A. Amended Accelerated Filing Deadlines for Annual Reports on Form 10-K
and Quarterly Reports on Form 10-Q
1. Deadlines for Accelerated Filers That Are Not Large Accelerated
Filers
An overwhelming majority of commenters supported our proposal to
amend the filing deadlines so that accelerated filers with a public
float of $75 million or more but less than $700 million, could continue
to file their annual reports on Form 10-K within 75 days after fiscal
year end.\30\ Most commenters also supported the proposed amendments to
maintain the 40-day deadline for quarterly reports on Form 10-Q for
accelerated filers and large accelerated filers.\31\
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\30\ See, e.g., letters from American Bar Association (``ABA'');
America's Community Bankers (``ACB''); Central Pacific Financial
Corporation (``Central Pacific''); The Chubb Corporation
(``Chubb''); Cogent Communications Group, Inc. (``Cogent'');
Commercial Metals Company (``CMC''); Cytokinetics, Inc.
(``Cytokinetics''); Deloitte (Oct. 31, 2005); Sean Dempsey; Emerson;
E&Y; Ferrellgas Partners, LP (``Ferrellgas''); Forest City
Enterprises (``Forest City''); Gander Mountain Company (``Gander'');
Glacier Bancorp, Inc. (``Glacier''); General Motors Corporation
(``GM''); Hercules Incorporated (``Hercules''); Independent
Community Bankers of America (``ICBA''); J.C. Penney Company, Inc.
(``JC Penney''); KPMG; LNR Property Holdings Ltd. (``LNR
Property''); The Nasdaq Stock Market, Inc. (``Nasdaq''); National
Retail Federation (``NRF''); Association of the Bar of the City of
New York (``NYCBA''); PwC; Safeway, Inc. (``Safeway''); Sidley
Austin Brown & Wood LLP (``Sidley Austin''); Southwest Gas
Corporation (``Southwest Gas''); Greg Swalwell; Torchmark
Corporation (``Torchmark''); UnionBanCal Corporation
(``UnionBanCal''); URS Corporation (``URS''); Vitria Technology,
Inc. (``Vitria''); Von Briesen & Roper, s.c.; Whole Foods Markets,
Inc. (``Whole Foods''); Williams-Sonoma, Inc. (``Williams-Sonoma'');
and Wilmington Trust Company (``Wilmington Trust'').
\31\ See, e.g., letters from ABA; ACB; American Bankers; The
Business Roundtable; Central Pacific; Chubb; CMC; Cytokinetics;
Deloitte (Sept. 16, 2005 and Oct. 31, 2005); E&Y; Emerson; Financial
Executives International (``FEI''); Ferrellgas; Financial Reporting
Advisors, LLP (``FinRA''); Gander; GM; Hercules; ICBA; KPMG;
Southwest Gas; Greg Swalwell; URS; Whole Foods; Williams-Sonoma; and
Wilmington Trust.
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We are adopting these amendments to the accelerated filing
deadlines as proposed so that accelerated filers that are not large
accelerated filers will become permanently subject to the 75-day and
40-day deadlines, the deadlines
[[Page 76629]]
to which all accelerated filers have been subject since their annual
reports filed for fiscal years ending on or after December 15, 2003.
After considering the comments on this proposal, we believe that it is
appropriate to provide relief to these smaller companies, given the
costs that might be incurred as a result of the further acceleration of
the periodic report deadlines for these companies. We have reason to
believe that the costs for these companies to comply with the further
acceleration of their filing deadlines would be greater than the
compliance costs for larger companies.\32\ The companies that comprise
the redefined category of ``accelerated filers'' comprise less than 5%
of the total U.S. equity market capitalization.\33\ We do not believe
that these costs would be justified by the benefits that investors
would obtain from earlier access to the reports.
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\32\ See Section V.A below on the cost-benefit analysis of the
filing deadline amendments.
\33\ See Section II.A.1 of Release No. 33-8591 (July 19, 2005)
[70 FR 44722]. See also Section V of this release. The Office of
Economic Analysis provided data indicating that the public float of
companies possessing between $75 and $700 million of public float
represented 4.3% of the total public float of companies on NYSE,
Amex, Nasdaq, the Over the Counter Bulletin Board, and Pink Sheets,
LLC. These calculations were based on public float and market
capitalization measurements from 2004 and 2005.
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2. Large Accelerated Filers
We did not propose to alter the previously adopted 60-day Form 10-K
deadline for the largest accelerated filers; instead, we proposed to
create a new group of accelerated filers called ``large accelerated
filers,'' to which that deadline would apply. We proposed to define an
issuer as a ``large accelerated filer'' once it meets the following
conditions for the first time at its fiscal year end:
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;
The issuer has been subject to the reporting requirements
of Exchange Act Section 13(a) or 15(d) \34\ for a period of at least 12
calendar months;
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\34\ 15 U.S.C. 78m(a) or 78o(d).
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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
\35\ for its annual and quarterly reports.
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\35\ 17 CFR 249.310b and 17 CFR 249.308b.
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The comments that we received on the proposed definition were mixed
and focused on the 60-day Form 10-K deadline for these companies. Some
commenters supported the establishment of this separate category of
companies and agreed with our assertion that larger companies tend to
have access to additional resources and a well-developed
infrastructure, which makes them better able to support the further
acceleration of the annual report deadline.\36\ Many commenters,
however, disagreed that larger companies are better able to comply with
accelerated filing deadlines and pointed out that larger companies
frequently have more complex business systems than smaller companies,
involving more complicated transactions, and often have operations that
are geographically widespread.\37\ A few commenters discouraged the use
of ``market float'' or ``size-based differentiated requirements'' among
issuers to determine filing deadlines.\38\
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\36\ See, e.g., letters from American Bankers; ACB; Cogent;
ICBA; and KPMG.
\37\ See, e.g., letters from Chubb; Emerson; Forest City;
Glacier; JC Penney; Safeway; Sidley Austin; UnionBanCal; URS; and
Whole Foods.
\38\ See, e.g., letters from NYCBA and Council of Institutional
Investors (``CII'').
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A few commenters, despite disagreeing with the application of the
previously adopted 60-day Form 10-K filing deadline for large
accelerated filers, said that they would support a distinction between
large accelerated filers and other accelerated filers if the Commission
determined not to revise the previously adopted 60-day deadline.\39\
They agreed that the 60-day Form 10-K annual report deadline should not
apply to issuers other than large accelerated filers.
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\39\ See, e.g., letters from ABA; Deloitte (Oct. 31, 2005); and
PricewaterhouseCoopers LLP (``PwC'').
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Some commenters suggested a different public float threshold than
the proposed $700 million threshold.\40\ These commenters recommended
that we raise the threshold to some higher amount (e.g., to $1 billion
\41\ or ``to a significantly higher level'' than $700 million \42\).
One commenter who supported the $700 million threshold stated that,
alternatively, we could establish a threshold that would fluctuate and
be designed to capture issuers representing 94% of total U.S. market
capitalization, given that issuers that currently have a public float
of $700 million or more represent 94% of the total U.S. market
capitalization.\43\ None of these commenters provided empirical data to
support a different public float threshold.
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\40\ See, e.g., letters from Cytokinetics; Deloitte (Oct. 31,
2005); and Gander.
\41\ See letters from Cytokinetics and Gander.
\42\ See letter from Deloitte (Oct. 31, 2005).
\43\ See letter from American Bankers.
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One commenter was of the view that we should not align the large
accelerated filer definition with that of a well-known seasoned issuer,
as proposed, if we chose to create the large accelerated filer
category.\44\ This commenter noted that, while many of the Securities
Offering Reform final rules apply to both equity and debt-only issuers,
the accelerated filing deadlines do not apply to issuers that have
registered only a class of debt securities under the Exchange Act. On
the other hand, another commenter supported the $700 million threshold
and favored consistency between the definition of a well-known seasoned
issuer and the definition of a large accelerated filer.\45\ Another
commenter suggested that we consider further our initial decision not
to include debt-only issuers in the accelerated filing system.\46\ This
commenter, along with others,\47\ thought that debt-only issuers should
only be allowed to file their periodic reports on a non-accelerated
basis if they were willing to forgo the automatic shelf registration
benefits that they may qualify for as well-known seasoned issuers.
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\44\ See letter from PwC.
\45\ See letter from American Bankers.
\46\ See letter from AICPA.
\47\ Two other commenters requested that the Commission consider
an ``opt-in'' or ``opt-out'' approach whereby large accelerated
filers who could qualify as a well-known seasoned issuer could
choose to opt-out of the benefits of automatic shelf registration
and instead file their annual reports under a 75-day deadline. See
letters from ABA and E&Y.
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Although commenters raised several issues and concerns that we
considered, we continue to believe that the establishment of the new
category of large accelerated filers is appropriate. While we
acknowledge the concerns of some commenters that larger issuers may
have more complex business systems than smaller issuers that could
potentially cause them to experience difficulties in meeting the most
accelerated Form 10-K deadline, we do not believe that these
observations warrant granting larger issuers permanent relief from the
additional 15-day acceleration of the Form 10-K deadline. We believe
that it is appropriate to establish the large accelerated filer
category, noting that companies with a public float of $700 million or
more represent nearly 95% of the U.S. equity market capitalization and
are more closely followed by the markets and by securities analysts
than
[[Page 76630]]
other issuers.\48\ Based on our experience with the accelerated filing
deadlines, we continue to believe that larger issuers generally have
sufficient financial reporting resources and sufficiently robust
infrastructures to comply with the 60-day deadlines, when they take
effect for annual reports filed for fiscal years ending on or after
December 15, 2006.\49\ In addition, the $700 million public float
threshold that is an element of the large accelerated filer definition
mirrors the public float eligibility requirement used in the new
Securities Act of 1933 (``Securities Act'') \50\ definition of ``well-
known seasoned issuer.'' \51\
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\48\ See Section V.A below and Section II.A.1 in Release No. 33-
8591.
\49\ In addition, internal data suggests that companies with a
market capitalization of $700 million or more may currently be
filing their annual reports on Form 10-K on an average of 70 days
after fiscal year end. Our data was derived from Audit Analytics.
Market capitalization was used as an approximation for public float
data.
\50\ 15 U.S.C. 77a et seq.
\51\ See Release No. 33-8591. The definition of a well-known
seasoned issuer is set forth in Securities Act Rule 405 [17 CFR
230.405]. We chose to incorporate the $700 million public float
threshold in connection with the extensive research conducted by our
Office of Economic Analysis during the development of the Securities
Offering Reform rules and demonstrable differences between companies
with this threshold and those with a lower public float threshold.
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In using the same public float threshold in both definitions,
however, we are not equating large accelerated filer status with well-
known seasoned issuer status. As we noted in the proposing release, the
timing for measuring an issuer's public float for the purpose of
determining accelerated filer or large accelerated filer status is
different from the timing for measuring public float for the purpose of
determining well-known seasoned issuer status. Moreover, debt-only
issuers are excluded from the category of both accelerated filers and
large accelerated filers. In addition, unlike with the large
accelerated filer definition, certain issuers known as ``ineligible
issuers'' are excluded from well-known seasoned issuer status, but not
from large accelerated filer status.\52\
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\52\ 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 [17 CFR 240.3a51-1] 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.
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An accelerated filer's public float threshold is to be measured as
of the last business day of the issuer's most recently completed second
fiscal quarter. We received some comments recommending that the public
float measurement be tied to a longer period of time or based on an
average of multiple dates instead of being tied to a single point in
time.\53\ These commenters reasoned that measurements required to be
made at a single point in time could cause companies that are
experiencing only temporary swings in stock price at the time that the
public float is measured to be pulled into the accelerated filer or
large accelerated filer definition.\54\ Commenters did not provide
empirical evidence that this is other than an isolated occurrence.
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\53\ See, e.g., letters from ACB; BDO Seidman; Deloitte (Oct.
31, 2005); PwC; and Greg Swalwell.
\54\ See, e.g., letter from ACB; BDO Seidman; and Deloitte (Oct.
31, 2005).
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We have considered the comments, but continue to believe that the
proposed measurement, which is consistent with the measurement that has
been in place since 2002, is an appropriate method for the purpose of
accelerated filing. Further, our revisions to the rules regarding
exiting accelerated filer status should address commenters' concerns to
some extent. As we stated in the 2002 adopting release, when we
developed a fixed determination date in advance of year-end in response
to comments, determining public float on the last day of the company's
second fiscal quarter provides a company with six months advance notice
as to whether or not it will be subject to accelerated filing at the
end of its fiscal year so it can begin making the appropriate
preparations.\55\ We have required companies to disclose this
computation on the Form 10-K cover page. We are not sufficiently
persuaded that we should change the method of computing public float
that was included in the original accelerated filer definition that we
adopted in consideration of comments in 2002.
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\55\ See Section II.B3 of Release No. 33-8128.
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In connection with our establishment of the large accelerated filer
category, we also are amending the definition of the term ``accelerated
filer'' to include only those companies that 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.
3. Form 10-K Deadline for Large Accelerated Filers
A majority of commenters, mostly companies and their auditors or
advisers or groups representing these interests, urged the Commission
to consider revising the rules to eliminate the final phase-in to the
60-day Form 10-K filing deadline for even the large accelerated
filers.\56\ These commenters provided various reasons as to why the
Commission should revise this deadline. First, several commenters
argued that the 60-day deadline would negatively affect the quality of
annual reports.\57\ They suggested, for example, that involvement of
the audit committee, board of directors, lawyers, auditors, and outside
experts in the annual report review process could be meaningfully
reduced under the 60-day deadline.\58\ Some commenters cautioned that a
shortened deadline may increase the chance of error.\59\ One commenter
noted that issuers may have an increased incentive to use recasted
language or limited analysis in the Management's Discussion and
Analysis section of the reports when pressured to meet a rigid
deadline.\60\ Second, some commenters reasoned that companies' more
frequent filing of current reports on Form 8-K,\61\ as well as the
shortened Form 8-K filing deadline, has reduced the need for further
acceleration of the Form 10-K deadline.\62\ Third, a number of
commenters pointed out the difficulties in meeting the accelerated
deadline given the time and costs involved in complying with various
regulatory demands, including the requirements regarding internal
control over financial reporting mandated by Section 404 of the
Sarbanes-Oxley Act of 2002.\63\ In addition, commenters claimed that
the accelerated deadline will increase costs without incremental
[[Page 76631]]
benefit,\64\ and some commenters claimed that the deadline will impose
stress and strain on those responsible for preparing the annual
report.\65\ Some companies provided timelines of the tasks needed to be
completed in preparing the annual report in order to show that they had
little time to spare.\66\
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\56\ See, e.g., letters from ABA; AICPA; Central Pacific; Chubb;
CMC; Cytokinetics; Deloitte (Sept. 16, 2005 and Oct. 31, 2005); Sean
Dempsey; Emerson; E&Y; Ferrellgas; Forest City; Gander; Glacier; GM;
Hercules; JC Penney; LNR Property; NRF; NYCBA; PwC; Safeway; Sidley
Austin; Southwest Gas; Greg Swalwell; Torchmark; UnionBanCal; URS;
Vitria; Whole Foods; Williams-Sonoma; and Wilmington Trust.
\57\ See, e.g., letters from ABA, AICPA; Central Pacific; Chubb;
CMC; Cytokinetics; Deloitte (Sept. 16, 2005 and Oct. 31, 2005); E&Y;
Ferrellgas; Forest City; Gander; Glacier; GM; Hercules; JC Penney;
LNR Property; NRF; NYCBA; PwC; Safeway; Sidley Austin; Southwest
Gas; Greg Swalwell; Torchmark; UnionBanCal; URS; Vitria; Williams-
Sonoma; and Wilmington Trust.
\58\ See, e.g., letters from GM and Sidley Austin.
\59\ See, e.g., letters from Whole Foods and Wilmington Trust.
\60\ See letter from Sidley Austin.
\61\ 17 CFR 249.308.
\62\ See, e.g., letters from ABA; CMC; Cytokinetics; Deloitte
(Sept. 16, 2005 and Oct. 31, 2005); JC Penney; GM; NRF; PwC;
Safeway; Sidley Austin; and Whole Foods.
\63\ See, e.g., letters from ABA; AICPA; BDO Seidman; CMC;
Deloitte (Sept. 16, 2005); Ferrellgas; Forest City; Glacier; GM;
Hercules; JC Penney; NRF; Safeway; Sidley Austin; Greg Swalwell;
UnionBanCal; and Williams-Sonoma.
\64\ See, e.g., letters from BDO Seidman; CMC; Deloitte (Sept.
16, 2005); Emerson; E&Y; Gander; JC Penney; LNR Property; NRF; PwC;
and Safeway.
\65\ See, e.g., letters from AICPA; Central Pacific; Chubb; Sean
Dempsey; GM; JC Penney; LNR Property; PwC; Safeway; Sidley Austin;
and UnionBanCal.
\66\ See, e.g., letters from Chubb; Ferrellgas; GM; and
Southwest Gas.
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A minority of commenters supported the application of the final
phase-in to the 60-day Form 10-K filing deadline to large accelerated
filers.\67\ One commenter provided empirical data supporting its
position. It analyzed 855 companies and noted that, while most of the
companies did not currently file their Form 10-K within 60 days after
fiscal year end, more issuers filed them within 60 days for their
fiscal year 2004 than for their fiscal year 2002 and these companies
filed, on average, within 70 days after fiscal year end.\68\
---------------------------------------------------------------------------
\67\ See, e.g., letters from CII; FinRA; ICBA; KPMG; and Nasdaq.
\68\ See letter from KPMG.
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Despite the comments requesting that we consider adopting a
permanent 75-day annual report deadline for even the large accelerated
filers, we do not think it is appropriate to do so. While the
information filed on Form 8-K current reports clearly is important, we
do not believe that it is an adequate substitute for the timely
availability of the information included in annual reports. While we
are mindful of the potential costs that may be incurred by large
accelerated filers in complying with the 60-day Form 10-K filing
deadline, for the reasons discussed in 2002 at the time of its original
adoption, we believe that the 60-day deadline continues to
appropriately balance, for these issuers, the time necessary to prepare
annual reports on Form 10-K with the need of the markets to receive
important information in a timely manner.
However, in acknowledgement of the recent responsibilities assumed
by even the largest companies, especially those associated with Section
404 of the Sarbanes-Oxley Act and regarding internal control over
financial reporting, we are postponing the implementation of the 60-day
Form 10-K deadline for the large accelerated filers for an additional
year. Under the amendments we are adopting, large accelerated filers
will be subject to the current 75-day Form 10-K deadline for fiscal
years ending before December 15, 2006. With respect to annual reports
filed for fiscal years ending on or after December 15, 2006, large
accelerated filers will become permanently subject to the 60-day Form
10-K deadline.
4. Form 10-Q Deadline for Large Accelerated Filers
A majority of the commenters supported our proposal not to subject
even large accelerated filers to the final phase-in for quarterly
reports to 35 days so that they could continue to file their quarterly
reports on Form 10-Q within 40 days after fiscal quarter end.\69\ One
association noted that this topic met with the most concern among the
accelerated filers in its membership.\70\ Another commenter who
supported the 60-day deadline for the Form 10-K for large accelerated
filers provided some empirical data to show that a 35-day deadline
could hinder the quality of management's review as well as reduce
dialogue with the audit committee.\71\ Although we requested comment on
whether large accelerated filers should be required to file their
reports within 35 days, none of the commenters responded affirmatively.
---------------------------------------------------------------------------
\69\ See, e.g., letters from ABA; ACB; American Bankers; The
Businees Roundtable; Central Pacific; Chubb; CMC; Cytokinetics;
Deloitte (Sept. 16, 2005 and Oct. 31, 2005); E&Y; Emerson; FEI;
Ferrellgas; FinRA; Gander; GM; Hercules; ICBA; KPMG; Southwest Gas;
Greg Swalwell; URS Corporations; Whole Foods; William-Sonoma; and
Wilmingron Trust.
\70\ See letter from American Bankers.
\71\ See letter from KPMG.
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We are adopting the amendments as proposed so that even large
accelerated filers will be subject to a 40-day Form 10-Q quarterly
report deadline, instead of the previously adopted 35-day deadline. We
proposed these amendments based on comments that we have received from
the public about the difficulties of meeting the 35-day deadline.
Consistent with the comments that we have received on the proposal, we
believe that these amendments appropriately relieve companies from the
further acceleration of the Form 10-Q quarterly report deadline. Also,
we do not perceive a net benefit from continuing to accelerate the Form
10-Q for large accelerated filers, given the size of the decrease in
the number of filing days (from 40 days to 35 days).\72\ We believe
that these amendments appropriately balance the time needed to prepare
quarterly reports on Form 10-Q with the need of the markets to receive
the information in a timely manner.
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\72\ See also Section V.A below on the cost-benefit analysis of
the filing deadline amendments.
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5. Other Comments on the Amended Filing Deadlines
In the proposing release, we also requested comment on whether:
Alternate structures for filing deadlines would be
preferable;
The filing deadlines should be changed for any category of
issuer;
The filing deadlines would cause confusion among
investors; and
The filing deadlines for accelerated filers and non-
accelerated filers that are longer than the deadlines for large
accelerated filers would unduly disadvantage investors in companies
that are not large accelerated filers.
Some commenters believed that the three tiers of filing deadlines
were too complex and may be confusing to investors.\73\ One commenter,
however, indicated that, while it thought that three filer categories
and sets of deadlines were not necessary, it suspected that the
investor community would adjust quickly to the deadlines.\74\ Another
commenter requested that we reconsider the longer deadlines for
companies that are not large accelerated filers in the next two years,
during which time, technologies and competency should improve allowing
shorter deadlines for all companies.\75\ Some commenters offered
recommendations for alternate deadlines--for example, that non-
accelerated filers should be subject to 90-day annual report and 45-day
quarterly report deadlines while all accelerated filers, even the
larger ones, should be subject to 75-day annual report and 40-day
quarterly report deadlines.\76\ A few commenters recommended that the
Commission uniformly apply 75-day annual report and 40-day quarterly
report deadlines to all reporting companies, including those with a
public float below $75 million.\77\ One commenter noted in response to
our request for comment asking whether the proposed deadlines would
unduly disadvantage investors in smaller companies, that although it
believed that investors in smaller companies would benefit from the
earlier availability of reports, such benefits are not significant
enough to justify the costs associated with further acceleration.\78\ A
few commenters suggested that the Commission conduct
[[Page 76632]]
further study on the appropriate deadlines for companies.\79\
---------------------------------------------------------------------------
\73\ See, e.g., letters from ACB; AICP; CII; Ferrellgas; FRA;
and NRF.
\74\ See letter from PwC.
\75\ See letter from CII.
\76\ See letter from BDO Seidman and E&Y.
\77\ See, e.g., letters from Emerson; LNR Property; NYCBA; and
Whole Foods.
\78\ See letter from PwC.
\79\ See, e.g., letter from Deloitte (Oct. 31, 2005) and Forest
City.
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After considering all of these comments, we continue to believe
that the three-tier structure, combined with the provision of an
additional year before the phase-in of the 60-day deadline for large
accelerated filers, appropriately balances differing resources and
needs of companies with investor protection interests. Any potential
confusion that may be caused initially by the changing deadlines should
be mitigated by the requirement that a company check a box on the cover
pages of its Form 10-K and Form 10-Q reports indicating whether it is a
large accelerated filer, an accelerated filer, or a non-accelerated
filer.
The following chart depicts the three tiers of filing deadlines
that will take effect for the fiscal years ending on or after December
15, 2005 \80\ as a result of the amendments:
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\80\ See Section III.D below.
----------------------------------------------------------------------------------------------------------------
Revised deadlines for filing periodic reports
Category of filer -----------------------------------------------------------------------
Form 10-K deadline Form 10-Q deadline
----------------------------------------------------------------------------------------------------------------
Large Accelerated Filer ($700MM or more) 75 days for fiscal years ending 40 days.
before December 15, 2006 and 60
days for fiscal years ending on
or after December 15, 2006.
Accelerated Filer ($75MM or more and 75 days......................... 40 days.
less than $700MM).
Non-accelerated Filer (less than $75MM). 90 days......................... 45 days.
----------------------------------------------------------------------------------------------------------------
Also, as noted in the proposing release, we do not intend to change
the deadlines for filing an annual report on Form 20-F. However, the
definition 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
for filing these forms. A foreign private issuer that loses its status
as a foreign private issuer and is, therefore, required to file reports
on Forms 10-K and 10-Q also must comply with the applicable deadlines
for filing those forms.
B. Exit Requirements From Accelerated Filer and Large Accelerated Filer
Status
In addition to amending the filing deadlines, we also are amending
the requirements for exiting accelerated filer status and establishing
requirements for exiting large accelerated filer status. Under the
rules prior to the amendments, an issuer that became an accelerated
filer would remain one unless and until the issuer subsequently became
eligible to use Forms 10-KSB and 10-QSB for its annual and quarterly
reports. Thus, a reporting issuer that first met the ``small business
issuer'' definition at the end of a fiscal year was required to wait
two years from that point before it could begin to file its annual
report on a non-accelerated filer basis.\81\
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\81\ For example, prior to these amendments, if an issuer had
met the accelerated filer definition at the end of its 2004 fiscal
year, the issuer would file its 2004 annual report on an accelerated
filer basis. However, in order to exit accelerated filer status, an
accelerated filer must have met the definition of small business
issuer and file on an accelerated filer basis at the end of its 2004
and 2005 fiscal years, before the prior rules would have allowed the
company to file on a non-accelerated filer basis beginning with its
first quarter Form 10-QSB in fiscal 2006.
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The proposed rules would have amended the accelerated filer
definition to allow an issuer to exit accelerated filer status at the
end of the fiscal year if its public float fell below $25 million, as
of the last business day of the most recently completed second fiscal
quarter. The proposed amendments also would have permitted a large
accelerated filer to exit large accelerated filer status if its public
float fell below $75 million, as of the last business day of the most
recently completed second fiscal quarter. Under the proposals, an
exiting large accelerated filer would become a non-accelerated filer if
its public float had fallen below $25 million, as of the determination
date.
In the proposing release, we noted that there were circumstances
under the existing accelerated filer definition where a company that no
longer had common equity securities outstanding, and therefore no
longer had a duty to file periodic reports with respect to these
securities, but continued to have a reporting obligation for another
security, was required to remain an accelerated filer for two years.
While the instances in which a company no longer would have publicly
held common equity securities but still would be subject to an Exchange
Act reporting obligation with respect to another class of non-common
equity security appeared to be uncommon, they may have occurred
occasionally in connection with a stock merger or leveraged buyout
structured as a cash merger or recapitalization.\82\ These companies
remained 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. The
proposed revisions sought to rectify this inequitable result.
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\82\ 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.
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Most of the commenters who remarked on this proposal supported
removal of unnecessary impediments preventing issuers from promptly
exiting out of accelerated filer status. Many of these commenters,
however, offered recommendations for modifying the proposals. These
recommendations included:
Raising the public float threshold that a company needs to
meet before exiting accelerated filer status; \83\
---------------------------------------------------------------------------
\83\ See, e.g., letters from ABA and ACB.
---------------------------------------------------------------------------
Raising the public float threshold so that the threshold
for exiting accelerated filer status is the same as the threshold for
entering the status; \84\
---------------------------------------------------------------------------
\84\ See, e.g., letters from AICPA; Deloitte (Oct. 31, 2005);
E&Y; FinRA; and PwC.
---------------------------------------------------------------------------
Tying the public float measurement to a period of time
(e.g., 30 days) or requiring the measurement to be based on an average
public float as measured on multiple days (e.g., the average of
multiple quarter ends); \85\ and
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\85\ See, e.g., letters from BDO Seidman; Deloitte (Oct. 31,
2005); FinRA; PwC; and Greg Swalwell.
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[[Page 76633]]
Requiring companies to provide notice, such as by filing a
Form 8-K, of a change in filing deadline status.\86\
---------------------------------------------------------------------------
\86\ See, e.g., letters from ACB; AICPA; E&Y; FinRA; Nasdaq; and
PwC.
---------------------------------------------------------------------------
A few commenters who acknowledged the importance of maintaining
filing stability believed that the objective could be achieved by tying
the measurement to a period of time instead of to a single point in
time, even if the public float threshold were raised higher than the
proposed threshold.\87\
---------------------------------------------------------------------------
\87\ See, e.g., letters from Deloitte (Oct. 31, 2005) and PwC.
---------------------------------------------------------------------------
We are adopting the exit requirements for accelerated filers and
large accelerated filers substantially as proposed, except that we are
raising the public float thresholds below which a large accelerated
filer must fall before it becomes eligible to exit that status from the
proposed $75 million to $500 million, and below which an accelerated
filer must fall before it becomes eligible to exit that status from the
proposed $25 million public float to a $50 million float. We are not
amending the method of computing public float for the reasons set forth
in Section III.A.2 of this release. While we considered the comments
regarding the filing of a Form 8-K announcing a change in filing
deadline status, and while we considered whether to require disclosure
in a company's Form 10-Q for its second fiscal quarter to provide
investors with advance notice that a company would be exiting
accelerated filer or large accelerated filer status, we have decided
that a mandated disclosure requirement is not justified, given the
infrequency of such an occurrence.\88\ As noted in Section III.C above,
we also believe that the cover page notations on the Form 10-K and Form
10-Q should mitigate any potential initial investor confusion regarding
when a company's reports are due. Some companies may choose, on their
own, to disclose a change in filing deadline status in a Form 8-K or
Form 10-Q.
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\88\ See text accompanying n.89 below.
-------------------------