News

SEC posts final rules regarding changes to accelerated filer status and accelerated filer deadlines

News Brief
December 21, 2005
By: Cydney Posner

The SEC has just posted the final rules regarding the changes to the accelerated filer definition and filing deadlines. The effect of the amendments to the filing deadlines is to delay the final phase-in of the 10-K filing deadline for large accelerated filers (a new category of filer), to maintain current 10-Q deadlines for large accelerated filers and to maintain current 10-K and 10-Q deadlines for accelerated filers (that are not large accelerated filers). In addition, the amendments ease the requirements for exiting accelerated filer status.

Compliance Dates

The release will become effective on the date of its publication in the Federal Register. Because the revised deadlines and revisions to the definition of an accelerated filer relieve restrictions on companies, the SEC has opted not to require the usual 30-day post-publication effective date. The revised accelerated filing deadlines begin to apply for the first annual report for fiscal years ending on or after December 15, 2005. In addition, a company that meets the 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, as of the last business day of its most recently completed second fiscal quarter, an aggregate worldwide market value of voting and non-voting common equity held by its non-affiliates of less than $50 million will, as of the end of its fiscal year, no longer be considered an accelerated filer and may begin to file reports on a non-accelerated basis, beginning with Form 10-K annual reports for fiscal years ending on or after December 15, 2005.

Amendments Adopted

The amendments adopted by the SEC are substantially as proposed, but with two significant modifications: the additional delay in the phase-in for large accelerated filers and further relaxation in the exit requirements from accelerated filer or large accelerated filer status.

Definition of Large Accelerated Filer. An issuer would become a "large accelerated filer" when it meets the following conditions for the first time at the end of its fiscal year:

  • Had, as of the last business day of its most recently completed second fiscal quarter, an aggregate worldwide market value of voting and non-voting common equity held by its non-affiliates of $700 million or more;
  • Has been subject to the reporting requirements of Section 13(a) or 15(d) for a period of at least 12 calendar months;
  • Has filed at least one annual report pursuant to Section 13(a) or 15(d); and
  • Is not eligible to use Forms 10-KSB and 10-QSB for its annual and quarterly reports.
The SEC believes that these issuers represent nearly 95% of the U.S. equity market cap and are more closely followed by the markets and by securities analysts. Note that, while the market cap threshold may be the same as that for WKSIs, the time for making the determination of WKSI status is different from that for determining status as a large accelerated filer. Moreover, debt-only issuers are excluded from the category of both accelerated filers and large accelerated filers, and "ineligible issuers" are excluded from being WKSIs.

In connection with the establishment of the large accelerated filer category, the SEC is also making a conforming amendment to the definition of "accelerated filer" to include only those companies that have, as of the last business day of the issuers' most recently completed second fiscal quarters, public floats of $75 million or more, but less than $700 million.

The SEC has added a new box on the cover pages of the Form 10-K and Form 10-Q reports where a company will be required to indicate whether it is a large accelerated filer, an accelerated filer or a non-accelerated filer.

Changes to Periodic Report Filing Deadlines. As a result of the amendments, the periodic report filing deadlines have been modified to:

  • Amend the Form 10-K annual report deadline for "large accelerated filers" to require that they 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);
  • Continue to apply a 40-day deadline for quarterly reports for both large accelerated filers and accelerated filers; and
  • Eliminate the final phase-in of the Form 10-K annual report deadline for the accelerated filers (that are not large accelerated filers) and continue to apply the 75-day deadline for annual reports.
The SEC has provided the following chart to show the three tiers of filing deadlines for fiscal years ending on or after December 15, 2005:

Category of Filer

Revised Deadlines for Filing Periodic Reports 
 

Form 10-K Deadline

Form 10-Q Deadline

Large Accelerated Filer
($700MM or more)

75 days for fiscal years ending before December 15, 2006 and 60 days for fiscal years ending on or after December 15, 2006

 40 days

 Accelerated Filer
($75MM or more and less than $700MM)

75 days

 40 days

 Non-ccelerated Filer
(less than $75MM)

 90 Days

 45 days

The Form 20-F filing deadline for foreign private issuers is unchanged by the amendments.

Changes to Exit Requirements. The SEC has also amended the requirements for exiting accelerated filer and provided requirements for exiting large accelerated filer status. These requirements:

  • 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; 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 filer status and comply with either the accelerated 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.
The revisions allow an issuer to exit accelerated filer status at the end of its fiscal year if it falls below the market cap threshold 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 the previous 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.

Other Amendments. The SEC has also adopted a number of conforming amendments. These include the same types of conforming changes to Rules 3-01, 3-09 and 3-12 of Reg S-X that were made when the accelerated filing deadlines were adopted in 2002. In essence, these changes require financial information included in SEC filings other than periodic reports to be at least as current as financial information included in these periodic reports. In addition, similar changes were made to transition reports. The amendments also clarify that the term "public float" in the large accelerated and accelerated filer definitions refers to the "aggregate worldwide market value of the company’s voting and non-voting common equity held by non-affiliates." This amendment codifies staff interpretation and is consistent with the public float condition in the WKSI definition. (The determination of public float is premised on the existence of a public trading market for the company’s equity securities.)

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