With 2018 quickly drawing to a close, attention now turns to preparing for the 2019 reporting season. As always, there are a number of compliance “musts” to focus on, as well as items that can be addressed in 2018 to make 2019 a little easier.

Determine Your Status as an Issuer

The U.S. Securities and Exchange Commission (SEC) recently adopted final rules to expand the availability of scaled disclosure requirements for a registrant to qualify as a smaller reporting company (SRC). Registrants with a public float of less than $250 million now qualify as an SRC, as compared to the $75 million threshold under the prior definition. [1] In addition, registrants that either do not have a public float or have a public float of less than $700 million are now permitted to provide scaled disclosures if annual revenues are less than $100 million, as compared to the prior threshold of less than $50 million in annual revenues. Companies that did not previously qualify as an SRC may wish to avail themselves of the scaled disclosure option. If your company did not previously qualify as an SRC but now does, decisions to scale back disclosure should be made in consultation with legal counsel, the independent auditors and the board of directors. You should also consider more indirect impacts from a scaling back disclosure. For example, Glass, Lewis & Co. (Glass Lewis) has said that if scaled-back disclosure substantially affects shareholders’ ability to make an informed assessment of executive pay practices, then this could result in Glass Lewis recommending votes against (or withholding votes from) compensation committee members.

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