Statement Summary
The U.S. public markets have seen a significant decline in listed companies, dropping by 40% since the mid-1990s. To address this issue, the SEC is proposing two key reforms: the Registered Offering Reform and the Filer Status Reform. These reforms aim to simplify the regulatory framework for public companies by removing outdated compliance requirements that hinder capital access for smaller firms.
Proposed Reforms
The Registered Offering Reform will allow more companies to use shelf registration, enabling faster capital raising without redundant SEC reviews. The Filer Status Reform will increase the threshold for stricter compliance requirements, reducing costs for most public companies.
The SEC emphasizes the need for public input on these proposals via comment portals, encouraging feedback from issuers and investors to enhance market efficiency and investor protection.
Original Statement
“In the mid‑1990s, more than 7,800 companies were listed on U.S. exchanges. That number has now fallen by roughly 40 percent. This drop in the number of exchange-listed companies is like a crack in a house’s foundation; we must improve and remodel to ensure our public markets are structurally sound for future generations of entrepreneurs and investors.”
As the Director of the Division of Corporation Finance, I have witnessed a layering on of disclosure rules and additional requirements to our public company registration and reporting rules, much like the layers of paint you would find on the banister in an old home. This layering – often slapped on in reaction to market events – has made the current public company regulatory framework unnecessarily costly, burdensome, and complex.
Impact of the Proposals
The Registered Offering Reform Proposal, if adopted, would give smaller public companies access to shelf registration for the first time in decades, increasing the number of eligible companies by more than 60%. It would rewire the house to support the higher amperage of capital flows required today.
Consider a small, pre-commercial biotech company that successfully completed an IPO within the past year, but that needs to conduct a follow-on offering to raise additional capital to further its clinical trials. The company cannot wait weeks or months for SEC review of its registration statement that repeats much of the same information already provided to investors in its IPO registration statement.
The Filer Status Proposal would raise the Large Accelerated Filer threshold from $700 million to $2 billion in public float, reserving the most demanding disclosure rules and reporting deadlines for the largest corporations. For everyone else – 81% of all public issuers – the amendments would likely result in reduced audit fees and other costs.
Call for Public Input
“The best renovations require careful planning and input from those who will actually have to live in the house, so please assist. If you are a company that has struggled with a particular SEC requirement, we want to hear about it. If you are an investor who relies on a certain disclosure to make investment decisions, tell us that too.”
These Proposals are open for public comment. The Chairman also opened a new comment portal specifically for IPO modernization. Submit your comments and help us get this renovation project right for issuers, market participants, and investors alike!
This statement is provided in the author’s official capacity as the Commission’s Director of the Division of Corporation Finance but does not necessarily reflect the views of the Commission, Commissioners, or other members of the staff. This statement is not a rule, regulation, or statement of the Commission. The Commission has neither approved nor disapproved its content.
