The United States’ Securities and Exchange Commission (SEC) has announced an overhaul of regulations governing how companies offer shares and report information to investors in a bid to encourage more of them to list on U.S. stock exchanges.
In one of the most ambitious reforms of U.S. capital markets in decades, the SEC said the changes would expand the number of companies able to issue shares faster and less expensively and loosen public disclosure requirements.
The markets and corporate regulator said it planned to amend its registered offerings rules and forms to increase efficiency, flexibility and cost savings for public companies, simplify reporting and align disclosure obligations with company size and maturity.
The first of two proposals would lift the threshold at which companies become ‘large accelerated filers’ from US$700 million (A$976 million) to $2 billion, based on the value of shares available for sale and trading by the public.
Five years after they list on the stock market, all such companies would avoid certain requirements for reporting, disclosure and independent audits.
The SEC also proposed expanding the number of companies able to issue ‘shelf offerings’ to pre-register securities and sell them quickly when conditions were favourable.
To qualify, they would need at least $75 million in shares publicly available for sale and trading and to have been subject to SEC reporting requirements for a year.
“Today, the Commission proposed two rulemakings that serve as the foundation for my agenda to Make IPOs Great Again,” said SEC Chairman Paul S. Atkins in a statement.
“These proposals build upon the legislative and regulatory concepts that have proven successful in the past and aim to extend that success to more companies – particularly small and mid-sized companies – and incentivise them to go and stay public.”
The regulator said the number of public companies in the U.S. had fallen as regulations had grown in recent decades, and many firms used private markets for financing.
The reforms follow a separate SEC proposal issued earlier this month that would permit public companies to file semi-annual reports instead of mandatory quarterly reports.
“Our proposal focuses on flexibility—ensuring companies and their investors can select reporting cadences that best reflect their business models,” SEC Commissioner Mark Uyedait said in a statement.
Atkins said the public company regulatory framework was in dire need of a comprehensive overhaul.
“Over the past 25 years, layers upon layers of legislative changes and SEC rules have created many different categories of public companies with complex, overlapping requirements and benefits,” he said.
