The SEC has approved changes to the NYSE’s listed company manualthat will enable more smaller issuers to benefit from exemptions from compensation committee compliance requirements.
The SEC in June adopted amendments to the ‘smaller reporting company’ (SRC) definition to expand the number of companies that qualify for certain existing disclosure benefits. The changes went into effect on September 10. According to an agency statement, the amendments ‘are intended to promote capital formation and reduce compliance costs for smaller companies while maintaining appropriate investor protections.’
The SEC estimates that 966 additional companies will be eligible for SRC status in the first year under the new definition.
Specifically, the new SRC definition enables a company with less than $250 mn of public float to provide scaled disclosures – up from the $75 mn threshold under the previous definition. The final rules also expand the definition to include companies with less than $100 mn in annual revenues if they also have either no public float or a public float that is less than $700 mn.
The amendments do not change the threshold used in the ‘accelerated filer’ definition that requires filers to provide the auditor’s attestation of management’s assessment of internal control over financial reporting.
However, the SEC said in a statement in June that agency chair Jay Clayton had directed officials to develop recommendations for possible additional changes to the accelerated filer definition to reduce the number of companies that qualify as such, and thereby to further reduce compliance costs.
In terms of the NYSE, SRCs can take advantage of certain exemptions from the exchange’s compensation committee requirements. Specifically, they do not have to comply with:
- Enhanced requirements with respect to the independence of compensation committee members
- Requirements regarding the analysis of the independence of any compensation consultant, legal counsel or other adviser to the compensation committee.
With the SEC’s approval, the NYSE has now tweaked its thresholds for listed companies to be eligible to benefit from these exemptions from its compensation committee requirements so that all companies qualifying for SRC status under the revised SEC definition will qualify for those exemptions.
