SEC’s Filer Status Proposal: Key Themes Emerging From the Public Comment Process

In May 2026, the Securities and Exchange Commission (SEC) proposed amendments¹ that would restructure the framework that public companies use to determine their SEC filer status and the related reporting and disclosure obligations that arise from that filer status. The proposal would replace the existing large accelerated filer, accelerated filer, and non-accelerated filer framework with two primary categories — large accelerated filers (LAFs) and non-accelerated filers (NAFs) — and would eliminate smaller reporting company (SRC) status as a separate category of filers. It would also substantially expand the population of companies that are eligible to utilize scaled disclosure and other accommodations that are currently available only to SRCs and emerging growth companies (EGCs).

Among other changes, the proposal would raise the public float threshold for LAF status from $700 million to $2 billion, change the methodology for calculating public float, and require a company to meet the applicable public float threshold for two consecutive years before transitioning into or out of LAF status. The proposal would also increase the seasoning period before a newly public company could become an LAF from 12 months to 60 months.

Companies that do not qualify as LAFs would generally be classified as NAFs and would be eligible for a range of scaled disclosure and other accommodations, including an exemption from the auditor attestation requirement for internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act and the requirement to conduct an advisory vote on executive compensation, as well as scaled financial statement and executive compensation disclosure. The amendments, if adopted as proposed, would significantly expand the population of public companies that are eligible to utilize these accommodations. The SEC estimates that approximately 81% of reporting companies would qualify as NAFs under the proposed framework, although those companies collectively represent approximately 6.5% of total market public float.

The proposal generated substantial public comment, with commenters expressing differing views on the appropriate balance between reducing the costs and complexity of public company reporting and preserving the disclosure, auditor oversight, and other investor protections that are a key part of the existing framework. The comments focused, in particular, on the proposed $2 billion LAF threshold, the expansion of the availability of the Section 404(b) exemption, the five-year seasoning period for LAF status, and the extension of scaled disclosure and other accommodations to a substantially broader group of public companies.

This alert provides an overview of the SEC’s proposal and summarizes the key themes emerging from the public comments. The issues raised in the comments will inform the SEC’s consideration of the final rules.

Overview of the Proposal

The amendments that the SEC has proposed would simplify the existing framework for determining filer status while at the same time expanding the accommodations available to a significant proportion of public companies. Under the proposed framework, reporting companies generally would be classified as either LAFs or NAFs, while the smallest reporting companies would be classified as smaller non-accelerated filers (SNFs). The existing accelerated filer and SRC categories would be eliminated, while EGC status would remain in place.

A reporting company generally would qualify as an LAF if it has at least $2 billion in public float and has been subject to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) for at least 60 months. All other reporting companies generally would be classified as NAFs. The proposal would also replace the current single-day measurement of public float with an average based on the closing price of the company’s common equity over a 10-business-day period and introduce a two-consecutive-year test for transitions into and out of LAF status.

The significance of the proposal extends beyond the classification of reporting companies. NAFs would be eligible for a substantially broader range of scaled disclosure and other accommodations than under the current framework. Among other things, the proposal would:

• Exempt NAFs from the requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002 to obtain an independent auditor attestation of management’s assessment of internal control over financial reporting
• Permit NAFs to provide two rather than three years of audited financial statements in certain filings and provide scaled financial disclosure
• Extend to NAFs certain scaled executive compensation disclosure requirements currently available to SRCs and EGCs, including relief from Compensation Discussion and Analysis (CD&A) and certain other compensation disclosures and shareholder advisory votes
• Provide NAFs with additional time to file periodic reports, including a 90-day deadline for Form 10-K
• Extend certain other accommodations, including the ability of newly public NAFs to elect deferred adoption of certain new or revised accounting standards during their first five years after initial registration

The proposal would also create a new subcategory of SNFs, which would comprise NAFs with total assets of $35 million or less. SNFs would have 120 days after fiscal year-end to file their Form 10-K, compared with 90 days for other NAFs, and 50 days after quarter-end to file their Form 10-Q, compared with 45 days for other NAFs. The SEC also proposes conforming amendments throughout its rules and forms to reflect the elimination of accelerated filer and SRC status and the broader use of the LAF and NAF classifications.

Taken together, these changes would significantly expand the number of public companies eligible for scaled disclosure and other accommodations. The SEC estimates that the proportion of reporting companies eligible for scaled disclosure now available only to SRCs and EGCs would increase from approximately 44% to approximately 81%. The proposal would also substantially expand the number of reporting companies that are exempt from the Section 404(b) auditor attestation requirement, with the SEC estimating that approximately 1,596 additional companies would become exempt if the amendments are adopted as proposed. The SEC describes the proposal as an effort to reduce regulatory complexity and compliance costs, facilitate capital formation, and make the public markets more attractive while continuing to apply the most comprehensive reporting requirements to companies representing the substantial majority of aggregate public float.

Comments on the SEC’s Proposal

The proposal generated a substantial number of comments, with submissions from public companies, investors, accounting firms, securities exchanges, business and professional organizations, academics, and other market participants. Unlike the comments that the SEC received on its semiannual reporting proposal, which reflected unusually broad opposition, the comments on the filer-status proposal reflect a more diverse set of views. Commenters express support for several aspects of the proposed framework while differing significantly over the scope of the accommodations that would be extended to a much larger group of NAFs.

A number of commenters support the SEC’s broader objectives of simplifying the filer-status framework, reducing unnecessary compliance costs, and revising applicable thresholds. Certain structural elements of the proposal, including the use of an averaging methodology to determine public float, transition mechanisms intended to reduce frequent changes in filer status, and periodic reconsideration of the applicable thresholds, also received support from commenters with differing views on other aspects of the proposal.

Commenters express diverging views on the consequences of revising the NAF definition, particularly the large number of companies that would qualify for accommodations as an NAF under the proposal. Commenters focus on the proposed exemption from the Section 404(b) auditor attestation requirement for companies with less than $2 billion in public float, the appropriateness of the $2 billion threshold itself, and the proposed 60-month seasoning period during which newly public companies would remain NAFs, regardless of their size. Commenters also express differing views regarding the proposed extension of scaled executive compensation disclosure and other accommodations to a substantially larger number of public companies.

Internal Control Over Financial Reporting Auditor Attestation and the $2 Billion Threshold

Under the proposed framework, only LAFs would be subject to the requirement to provide an auditor attestation of management’s assessment of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. As a result, companies with less than $2 billion in public float, as well as newly public companies during the proposed 60-month seasoning period, generally would not be required to obtain an independent auditor attestation of management’s assessment of internal control over financial reporting.

Commenters expressing support for the SEC’s proposal generally view the expansion of the availability of the exemption as a meaningful opportunity to reduce the costs of being a public company. Some commenters argue that the costs associated with Section 404(b) can be particularly significant for smaller and midsize companies and may divert resources from investment, innovation, and other strategic priorities. Some commenters also supply empirical evidence suggesting that prior expansions of the Section 404(b) exemption for certain low-revenue issuers were associated with increased equity issuance and investment without a detectable deterioration in reporting quality, although the authors of that research cautioned against extending those findings to companies with public float approaching $2 billion.

Other commenters, including accounting firms, institutional investors, and academics, express concern that the proposal to expand the availability of the Section 404(b) exemption would extend it beyond the population of companies for which the costs of auditor attestation may outweigh its benefits. These commenters emphasize the role of independent auditor attestation in identifying material weaknesses and improving the reliability of financial reporting, and they question whether management’s assessment of internal control over financial reporting under Section 404(a), without corresponding auditor attestation, would provide investors with comparable assurance. All four of the Big Four public accounting firms express opposition to, or serious reservations about, the proposed exemption at the $2 billion level.² PwC, which proposes retaining the existing $700 million threshold, submitted empirical data showing that the rate of material weaknesses identified in the first year of auditor attestation for companies with public float below $2 billion is approximately 24% — more than 70% higher than for companies above that level — and that this rate falls sharply in subsequent years, suggesting the attestation requirement delivers its greatest value precisely when it is most burdensome.³ EY cites data showing that IT control issues appear in 60% of adverse auditor internal control over financial reporting opinions but only 31% of management-only adverse disclosures, raising concerns about systematic underreporting of control deficiencies in the absence of auditor involvement.⁴ The academic evidence cited in the comment letters is mixed, but several studies submitted by commenters suggest that auditor attestation may provide benefits extending beyond the identification of existing control deficiencies by improving the control environment and reducing the risk of misreporting. Notably, Professors Ge, Koester, and McVay — whose research the SEC cited in the release — submitted a comment letter clarifying that the SEC had selectively cited their findings while omitting what they described as their most significant conclusion: that the aggregate costs of not requiring an attestation of management’s assessment of internal control over financial reporting plausibly exceed the audit-fee savings, with the benefit of reduced misreporting estimated at $935 million compared with fee savings of $388 million.⁵

Institutional investors also focus on the SEC’s rationale for proposing to expand the universe of companies that are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting. For example, CalPERS notes that the SEC’s own analysis finds that auditor testing “generally results in disclosure of deficiencies not previously disclosed by management” and emphasized that accelerated filers and NAFs have higher rates of reported ineffective internal controls and financial restatements than LAFs.⁶ The Principles for Responsible Investment (PRI), whose signatories collectively represent approximately $130 trillion in assets under management, frame the Section 404(b) auditor attestation requirement as a cornerstone of confidence in the reliability of financial statements and argued that the expected rate of full and accurate self-disclosure of ineffective controls without auditor involvement renders management-only assessment an insufficient substitute.⁷

Other groups question the SEC’s rationale with respect to the auditor attestation requirement. For example, a group of more than 50 professors and former regulators warned that the proposal “removes the requirement for external audits of ICFR for all registrants with up to $2 billion in public float [...] yet these are registrants for whom assurance and reporting quality are most critical, as they have greater risk of weak controls and misstatements than larger filers.”⁸

Commenters also express diverging views on the proposed $2 billion public float threshold for determining LAF status. While some commenters support the proposed threshold as an appropriate recalibration of the $700 million threshold established more than two decades ago, other commenters argue that $2 billion would extend NAF accommodations to companies with sufficient size and resources to bear the costs associated with LAF status. Commenters propose a range of alternatives, including retaining the existing $700 million threshold; adjusting that threshold for inflation to approximately $1.1 billion to $1.2 billion; adopting an intermediate threshold, such as $1 billion; and supplementing public float with a revenue-based measure.⁹ Some commenters focus on the SEC’s rationale for the proposed threshold. For example, the Audit Committee Council raises a concern about the statistical adequacy of the SEC’s finding that companies remaining subject to LAF requirements would represent approximately 93.5% of total market public float, noting that with a small number of very large companies now representing an outsize share of total market capitalization, a coverage statistic expressed as a percentage of aggregate float may substantially overstate the practical breadth of investor protection, particularly for investors in smaller public companies.¹⁰ Despite differing views on the appropriate threshold, many commenters are supportive of a periodic reconsideration of the filer thresholds to account for changes that occur over time.

Some commenters raise questions about the SEC’s legal authority to expand the availability of the Section 404(b) exemption as proposed by redefining the filer status categories, rather than by adopting a specific statutory exemption. For example, North American Securities Administrators Association (NASAA), which represents all 50 state securities regulators, and a coalition of academics and former regulators argued that Congress created limited, precisely calibrated exemptions from the Section 404(b) mandate in the Dodd-Frank Act and the JOBS Act and that using definitional authority to extend a functionally equivalent exemption to a substantially larger population of companies may raise questions under the major questions doctrine as articulated by the Supreme Court in West Virginia v. EPA, 597 U.S. 697 (2022).¹¹

The Five-Year On-Ramp and Scaled Disclosure Accommodations

Commenters also focused on the proposed 60-month seasoning period for achieving LAF status. Under the proposal, a newly public company would remain an NAF for at least five years, regardless of its public float, before it could qualify as an LAF. The SEC views this extended on-ramp as providing newly public companies with additional time to develop the resources and infrastructure necessary to comply with the more extensive disclosure, accelerated filing, and Section 404(b) auditor attestation requirements applicable to LAFs. The SEC also proposes to extend to NAFs during this on-ramp period the ability to defer adoption of certain new or revised accounting standards, a benefit currently available only to EGCs under Section 107 of the JOBS Act.

Supporters of an extended on-ramp generally emphasize the benefits of reducing the costs and operational burdens associated with transitioning to public company status. In the proposing release, the SEC points to the five-year on-ramp available to EGCs under the JOBS Act and indicates that extending a comparable period before a company achieves LAF status encourages companies to enter and remain in the public markets. Nasdaq, which submitted a comment letter supporting the proposed seasoning period, argued that the extended on-ramp would provide a strategic and financial benefit to early-stage companies by allowing them to focus on building value and internal infrastructure before assuming the full compliance burden of LAF status. Companies would also remain free to comply voluntarily with requirements from which they are exempt, including obtaining an auditor attestation of management’s assessment of internal control over financial reporting where they determine that doing so would benefit the company or its investors.

Many commenters express concern with whether a five-year seasoning period is appropriate for all newly public companies, without regard to their size, resources, or operating maturity. Commenters note that this concern is particularly pronounced for large companies that may enter the public markets with substantial public floats and well-developed financial reporting infrastructures but that nevertheless remain eligible for NAF accommodations for five years. In this regard, several commenters note that the analogy to the EGC on-ramp is imperfect because the JOBS Act conditions EGC status on a revenue ceiling of $1.235 billion, a five-year maximum period for EGC status, and an automatic exit from EGC status upon achieving large accelerated filer status, which ensures that the on-ramp is available only to companies below a defined size threshold. By contrast, the SEC’s proposed seasoning period for LAF status imposes no analogous size limitation and would apply equally to a newly public company with $5 billion in public float as to one with $50 million.

Commenters propose several alternatives, including: a shorter seasoning period — such as 24 months (as recommended by PwC) or 24 to 36 months (as recommended by Morningstar); a size-based mechanism that would require larger companies to transition to LAF status sooner (as proposed by The North Carolina Association of Certified Public Accountants and Baker Tilly); or elimination of the seasoning requirement altogether.¹² Some commenters also raised questions about how the proposed seasoning period would apply to spin-offs and other transactions involving mature businesses that become reporting companies independently, arguing that a company spun off from a large public parent should not receive the same on-ramp as a company completing its first public offering. One commenter identified this as a “de-seasoning” problem, in that companies spun off from large, seasoned public parent companies would qualify as NAFs under the SEC’s proposed framework solely because they had not been public for 60 months, even though they emerged from mature reporting infrastructures with well-established internal controls programs.¹³

The significance of the proposed on-ramp is amplified by the accommodations that would accompany NAF status. In addition to the Section 404(b) exemption discussed above, NAFs generally would be permitted to provide scaled financial and non-financial disclosures currently available to SRCs and certain accommodations currently available to EGCs. These would include two rather than three years of certain audited financial statements, scaled executive compensation disclosure, and relief from certain Regulation S-K disclosure requirements. NAFs also would be exempt from pay-versus-performance disclosure and shareholder advisory votes on executive compensation, including say-on-pay, say-on-frequency, and golden parachute compensation. The Council of Institutional Investors argues that say-on-pay and pay-versus-performance disclosure serve functions that are especially important in the period immediately following a company’s entry into the public markets, when investors are still developing their understanding of management’s compensation philosophy and the relationship between pay and performance outcomes, and that exempting newly public companies from these requirements during their first five years would deprive investors of tools they need precisely when those tools are most valuable. Institutional investors, including CalPERS, PRI (whose signatories represent approximately $130 trillion in assets under management), and the AFL-CIO, similarly argue that the package of accommodations available to NAFs under the proposal is far broader than what Congress contemplated when it designed the EGC framework and that extending the equivalent of that full package to companies of any size for five years goes beyond what the underlying policy rationale can support.¹⁴

Investor Protection, Executive Compensation, and Capital Formation

The proposed expansion of the number of companies that would qualify for NAF status also prompts differing views of commenters as to the appropriate balance between reducing public company compliance costs and preserving information and governance mechanisms that investors use in making investment and voting decisions.

In the proposing release, the SEC acknowledges that extending scaled disclosure accommodations to a substantially larger population of reporting companies would reduce the information available to investors, but the SEC notes that lower compliance costs could encourage more companies to enter and remain in the public markets, ultimately increasing investment opportunities and transparency relative to the private markets. Several commenters challenge the SEC’s rationale, pointing out that the SEC’s economic analysis quantifies the compliance cost savings to public companies but does not attempt to quantify the corresponding costs imposed on investors by reduced disclosure and governance rights, as well as that a complete cost-benefit analysis must account for both elements.¹⁵

Some commenters express particular concern for executive compensation and corporate governance disclosures. Under the proposal, NAFs generally would be permitted to provide scaled executive compensation disclosure and would not be required to provide CD&A, pay ratio disclosure, pay-versus-performance disclosure, or certain compensation tables. NAFs also would be exempt from shareholder advisory votes on executive compensation, including say-on-pay, say-on-frequency, and golden parachute votes. 

Commenters supporting these accommodations indicate that the costs associated with extensive disclosure and governance requirements may not be justified for companies outside the largest segment of the public markets. From this perspective, extending accommodations currently available to SRCs and EGCs would simplify the regulatory framework, reduce compliance costs, and allow companies to devote additional resources to their businesses. NYSE Institute and Nasdaq each submitted comment letters supporting the proposed executive compensation accommodations, with Nasdaq specifically arguing that exempting NAFs from say-on-pay and say-on-frequency votes would reduce costs and eliminate disclosure that can be unwieldy for smaller and newly public companies. The American Bankers Association similarly supported the proposed accommodations, characterizing them as particularly meaningful relief for community banks and other smaller reporting issuers for which the costs of CD&A preparation and say-on-pay administration are disproportionate to their informational value.¹⁶

Other commenters question whether accommodations developed for smaller or newly public companies should be extended to a population that could include substantially larger and more seasoned issuers. Institutional investors and other commenters emphasize the role of executive compensation disclosures and shareholder advisory votes in evaluating pay practices, assessing alignment between compensation and performance, and exercising shareholder oversight. Glass Lewis argues that compensation tables and related disclosures “operate in tandem” such that removing any element degrades the quality of the overall picture available to shareholders and that say-on-pay votes have become a foundational component of the shareholder-company dialogue on compensation that cannot simply be eliminated for a majority of public companies without material consequences for investor oversight.¹⁷ CalPERS notes that the pay-versus-performance disclosure rule was adopted only four years ago pursuant to a specific congressional mandate in Section 953(a) of the Dodd-Frank Act and that the SEC has not allowed sufficient time to evaluate its effectiveness before proposing changes that would effectively eliminate the requirement for the vast majority of reporting companies.¹⁸ Commenters also suggest other alternatives, such as retaining certain compensation disclosures or shareholder votes while scaling other requirements, rather than extending the full range of existing accommodations to all NAFs. For example, Northern Trust proposes retaining say-on-pay for all NAFs but requiring such votes only once every three years and preserving the golden parachute advisory vote, given its infrequency and significance to investors evaluating change-of-control transactions.¹⁹

Commenters expressing support for the SEC’s proposals indicate that reducing the costs and complexity associated with public company reporting could make the public markets more attractive, particularly for smaller and emerging companies. By contrast, other commenters question the extent to which regulatory costs are responsible for the decline in the number of US public companies and point to factors such as the increased availability of private capital as significant drivers of companies’ decisions to remain private. Professors Patatoukas and Paul of UC Berkeley’s Haas School of Business submitted an empirical analysis of the JOBS Act — which was the most directly analogous implementation of scaled disclosure for newly public companies — finding that EGC issuers providing reduced disclosure raised capital at inflated valuations and subsequently underperformed the market, with nearly two-thirds generating negative long-term returns relative to the market over their first three years as public companies and with the losses falling disproportionately on individual investors who lacked the analytical resources available to institutional investors.²⁰ Better Markets and Americans for Financial Reform Education Fund each cited academic research finding that regulatory compliance costs explain only a small fraction of the observed decline in the number of US public companies and that the primary driver of that decline is the increasing availability and sophistication of the private capital markets rather than the cost of public company reporting.²¹

What’s Next?

As the SEC considers whether and in what form to proceed with this rulemaking, several issues raised in the comment record are likely to remain particularly important, including:

• Whether $2 billion is the appropriate public float threshold for LAF status and whether public float should remain the principal measure or be supplemented by revenue or other metrics
• Whether the exemption from providing an auditor attestation of management’s assessment of internal control pursuant to Section 404(b) of the Sarbanes-Oxley Act should extend to all NAFs or instead apply to a more limited population of companies
• Whether the proposed 60-month seasoning period appropriately balances the benefits of providing an extended on-ramp to LAF status with the disclosure and oversight interests of investors, particularly in the case of large newly public companies, including companies that enter the public markets through spin-offs or other transactions involving mature businesses with established reporting infrastructures
• Whether all NAFs should receive the full range of proposed scaled disclosure, executive compensation, and corporate governance accommodations or whether particular requirements should be retained for some categories of NAFs
• Whether the proposed amendments should be modified in light of their interaction with the SEC’s other pending initiatives affecting public company reporting and capital formation, including the proposed semiannual reporting framework, registered offering reform, and climate disclosure rescission, the cumulative effects of which multiple commenters argue have not been adequately analyzed in the proposal²²

Public companies, boards of directors, and their advisers should continue to monitor this rulemaking. Companies that could be reclassified under the proposed framework should consider the potential implications for financial reporting, auditor attestation, executive compensation and corporate governance disclosures, filing deadlines, and disclosure controls and procedures, including whether they would continue voluntarily to follow certain practices or provide certain disclosures from which they would become exempt. Audit committees, in particular, should begin evaluating their company’s posture on voluntary auditor attestation in a potential exemption scenario, given that the decision to discontinue or maintain attestation will be a governance decision with material implications for investor confidence and audit committee credibility. Newly public companies and companies contemplating an IPO should also monitor the treatment of the proposed five-year on-ramp, which could materially affect the timing of their transition to the reporting and governance requirements applicable to LAFs. Companies that are currently in the process of transitioning from non-accelerated or accelerated filer status to large accelerated filer status should be aware that if a final rule is adopted, transition relief may be available, and they should consider engaging with counsel on their options under both the current and proposed frameworks.