Comment Letter on the SEC’s Proposal to Modify Emerging Growth Company Accommodations and Filer Status Classifications

This post is based on a comment letter submitted to the SEC regarding the SEC’s proposal on Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies, by 115 signatories, including professors, former regulators, and accounting and audit practitioners. Below is the text of the letter with minor adjustments to eliminate the correspondence-related parts, followed by the full list of signatories.

Thank you for the opportunity to comment on the Commission’s proposal to modify Emerging Growth Company accommodations and Filer Status classifications. We write to respectfully convey our concerns with the proposal and the process underlying this proposal.

We are a group of professors, former regulators and accounting and audit practitioners with expertise in accounting, capital markets and regulation. Our research, teaching and professional experience address questions concerning regulation and the role of financial reporting in the effective functioning of U.S. capital markets, with implications for the role of audits of financial statements and internal controls over financial reporting (ICFR). We believe that this background provides both a unique perspective on the importance of stability in regulatory institutions and a practical opinion on the state of evidence from accounting, auditing, finance and economic research. In our professional roles, we have regularly emphasized the importance of reliable financial reporting for the functioning and credibility of U.S. capital markets. Our capital markets have been the envy of the world precisely because of the regulatory framework that has allowed them to develop and flourish, thereby promoting capital formation and employment opportunities. Drawing on our collective experience with the causes and consequences of fraud and misreporting, we believe it is vital that the lessons of the early 2000s are not forgotten.[1]

We therefore write to express our serious concerns with the Commission’s proposal and analysis, which we believe underestimates the adverse impacts of the proposed rule changes on the quality of financial reporting, on investors, on the trust investors have in our capital markets and the capital formation it enables.

The Commission’s economic analysis does not adequately consider the benefits to investors of auditor attestation of ICFR.

The requirement for external audits of ICFR was created through the Sarbanes Oxley Act of 2002 on a bipartisan basis in the aftermath of unprecedented financial reporting misconduct. Since its implementation, substantial research indicates that management and external audits of ICFR have contributed significantly to the quality and credibility of financial reporting and played a vital role in deterring misreporting and fraud.

This case is well made in comment letters on this proposal by Professors Coates, Coffee, Cox and Seligman, by Professors Ge, Koester and McVay, by Professors Lewis-Western, Basu and McVay, by Professors Rajgopal, Wong and Zhao, and by the comment by Professors Barth, Landsman, Schroeder and Taylor in response to the Commission’s 2019 proposed Amendments to the Accelerated Filer and Large Accelerated Filer Definitions.[2]  Two decades of academic research on the consequences of SOX section 404(b) provide evidence that it generates benefits for issuers and their shareholders that extend beyond compliance. Ge, Koester, and McVay’s (2017) findings are particularly relevant, as they test for measurable benefits of Section 404(b) and find evidence that they exceed its measurable costs.[3] Barth, Landsman, Schroeder and Taylor (2019), using an alternative measure of benefits, the losses avoided by investors, find that the costs of ICFR audits pale in comparison to the costs to investors of the misreporting they deter.[4]

The proposal removes the requirement for external audits of ICFR for all registrants with up to $2 billion in public float and registrants of any size in their first 5 years post-IPO. However, 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.

The Commission’s economic analysis does not adequately consider the costs to investors of reduced reporting requirements.

The proposal allows nonaccelerated filers and IPO companies in their first 5 years to adopt scaled disclosure requirements, including only 2 years of financial statements. Moving from the current reporting system where 3 years of income statements, statements of cash flows and changes in owners’ equity are presented and discussed in the same presentation to only 2 years creates a friction that is likely to disproportionately burden retail investors. The evidence suggests frictions such as this will reduce investors’ ability to incorporate financial statement information in their investment decisions, resulting in less informative prices and weaker investment performance by investors with less resources.[5]

The Commission’s economic analysis overestimates the benefits that the proposed rule change will generate in increased IPO listings due to the reduced reporting requirements.

As Professors Coates, Coffee, Cox and Seligman write: “This premise is strongly challenged by the evidence at hand. The much-trumpeted decline in public companies is not isolated to the United States but is a worldwide phenomenon. It is not disproportionate in the United States and is a result of a variety of causes.”[6]

Professor Dambra’s letter commenting on this proposal also provides no support for the SEC’s claim: “While I can see the benefits to extending the ICFR exemption, the Commission should be clear it is not costless and experts on the JOBS Act do not expect this to increase IPO volume. …This can be net positive for investors, but perhaps at the cost of lower financial reporting reliability.”[7]

The comment period for this proposal is insufficient and should be extended by at least 90 days to allow for full processing of the proposal and discussion by affected groups.

The scope of proposed changes is unprecedented in the SEC’s 90-year history. Each of the many changes being proposed is potentially very consequential, including the exemption from ICFR audits of filers up to $2 billion in float, exemption from ICFR audits for all IPOs in their first 5 years regardless of size or potential systemic risk, and reduced reporting requirements to 2 years of financial statements for IPOs in their first 5 years and for all nonaccelerated filers. Further substantial reduction in disclosure is proposed in the related Semiannual Reporting proposal, allowing all filers to report semiannually rather than quarterly.

Given the very significant and wide-ranging changes being proposed, predominantly with adverse impacts for investors, we believe the overlapping 60-day comment periods on the Semiannual Reporting proposal, the EGC Accommodations and Filer Status proposal, the Registered Offering Reform proposal and the Climate Risk Rescission proposal are insufficient. We therefore request that the Commission extend these comment periods for an additional 90 days.

Strategy for change

In closing, we do not support the Commission’s proposal and are concerned that its wholesale dismantling of effective mechanisms will lead to significant harm to investors. We respectfully request that the Commission withdraw the present proposal and consider what targeted refinements can be made with the support of current evidence or pilot studies. We recommend that proposed changes develop through a strict system of due process and open deliberations, as in other areas of accounting standard-setting. We believe such a process will lead to better outcomes for investors, firms and the credibility of our capital markets. This requires a long-term perspective but is a proven model that leads to better informed and enduring regulations. Critically, it allows firms to make well-founded decisions concerning their participation in capital markets and their reporting systems, generates reliable information for investors and furthers the transparency and fairness of our capital markets.

List of Signatories

Anat R. Admati, Stanford Graduate School of Business

Chris Agoglia, Isenberg School of Management, University of Massachusetts Amherst

Spencer Anderson, Indiana University

Lindsay M. Andiola, PhD, CPA, Virginia Commonwealth University

Musaib Ashraf, Michigan State University

Jordan M. Bable, PhD, CPA, Indiana University

Andrew D. Bailey, Jr., University of Illinois at Champaign/Urbana

Max H. Bazerman, Harvard Business School

G. Bradley Bennett, University of Massachusetts Amherst

Darren Bernard, University of Washington

Lori Bhaskar, Kelley School of Business, Indiana University

Terrence Blackburne, Oregon State University

Elizabeth Blankespoor, University of Washington, Foster School of Business

Justin Blann, Georgia Institute of Technology

Christine A. Botosan, University of Utah

Joseph Brazel, North Carolina State University

Kyle Broderick, CPA, Indiana University

Jason Brown, Indiana University

Inkyu Byun, Indiana University

Jongwoon (Willie) Choi, University of Wisconsin-Madison

Jung Ho Choi, Stanford Graduate School of Business

Preeti Choudhary, University of Arizona

Hans B. Christensen, Booth School of Business, University of Chicago

Jeff Clark, Indiana University

Daniel Cohen, Owen Graduate School of Management, Vanderbilt University

Robert A. Conway, CPA

Anna Costello, Booth School of Business, University of Chicago

Eliabeth Cowle, Colorado State University

James D. Cox, School of Law, Duke University

Mark DeFond, Leventhal School of Accounting, University of Southern California

Ed deHaan, Stanford University Graduate School of Business

James R. Doty, PCAOB

Omri Even-Tov, University of California Berkeley

Paul E. Fischer, The Wharton School of the University of Pennsylvania

Simon Fung, Deakin University

Lindsey Gallo, Ph.D., University of Michigan

Greg Geisler, Indiana University (Bloomington)

George S. Georgiev, University of Miami School of Law

Brandon Gipper, Mendoza College of Business, University of Notre Dame

Cristi A. Gleason, University of Iowa

Joanna Golden, University of Memphis

Nathan Goldman, North Carolina State University

Parveen P. Gupta, Lehigh University

Steven B. Harris, U.S. Senate Banking, Housing and Urban Affairs Committee under Chairman Paul S. Sarbanes; PCAOB Board Member 2008-2017

John M. Hassell, Indiana University

Shane Heitzman, USC Leventhal School of Accounting

P.J. Hoffman, Indiana University – Bloomington

Chris Hogan, Michigan State University

Rani Hoitash, Bentley University

Patrick J Hurley, Northeastern University, D’Amore-McKim School of Business

Andrew Imdieke, University of Notre Dame

Dr. Scott C. Jackson, Ph.D., University of Nevada Las Vegas

Alan Jagolinzer, University of Cambridge

Joseph Kalmenovitz, University of Rochester

John D. Keyser, Arizona State University

Young Kim, George Mason University

Andrew Kitto, University of Massachusetts Amherst

Allison Koester, Georgetown University

Yaniv Konchitchki, University of California at Berkeley

Jagan Krishnan, Fox School of Business, Temple University

Jayanthi Krishnan, Fox School of Business, Temple University

John M. Lacey, California State University, Long Beach

Phillip Lamoreaux, Arizona State University

Mark Lang, University of North Carolina

Stephannie Larocque, University of Notre Dame

Rebecca Lester, Stanford Graduate School of Business

Christian Leuz, University of Chicago

Thomas J. Linsmeier, University of Wisconsin-Madison

Xiaotao Kelvin Liu, Northeastern University

Rachel Lyman, Indiana University

Eldar Maksymov, Arizona State University

Brian Mayhew, CPA, PhD, University of Wisconsin – Madison

Maureen McNichols, Stanford Graduate School of Business

Sarah McVay, University of Washington – Seattle

Tyler Menzer, Texas Christian University

Karen K. Nelson PhD, CPA, Texas Christian University

Kara Obermire, Oregon State University

Robert Pawlewicz PhD CPA, University of Richmond

Carmen Payne-Mann, University of Colorado

Mark Peecher, University of Illinois Urbana-Champaign

Paul Pfleiderer, Stanford Graduate School of Business

Dr. Sri Ramamoorti, University of Dayton

Samantha Ross, UC San Francisco Law School

Linette Rousseau, Ph.D., CPA, MAcc, Indiana University

Jordan Samet, Indiana University

Ashley Sauciuc, Indiana University

Catherine Schrand, University of Pennsylvania

Joseph H. Schroeder, Ph.D. CPA, Indiana University

Dr. Timothy Seidel, Brigham Young University

Thomas I. Selling Ph.D.

Amy Sheneman, The Ohio State University

Sarah Stein, Virginia Tech

Dave Sullivan, Public Interest Oversight Board

Dan G Sunderland, Northeastern University, D’Amore-McKim School of Business

Brandon Szerwo, University at Buffalo

Amy Tegeler, University of Winconsin-Milwaukee

Jacob Thomas, Yale University

Xiaoli (Shaolee) Tian, Georgetown University

Andrea Tillet, University of Wisconsin-Madison

Lynn E. Turner

Danye Wang, University of Iowa

Daniel Wangerin, University of Wisconsin-Madison

Kimberly D. Westermann, Orfalea College of Business, California Polytechnic State University

Jaron Wilde, University of Iowa

Franco Wong, University of California Irvine

Da (Will) Wu, Clark University

Nina Xu, University of Connecticut

Tzachi Zach, Ohio State University

Sarah Zechman, University of Colorado Boulder

Karla M. Zehms, University of Wisconsin – Madison

Wei Zhang, University of Massachusetts Amherst

Frank Zhou, Dartmouth College

Christina Zhu, The Wharton School, University of Pennsylvania

Ally Zimmerman, Florida State University

Cathy Zishang, University of Houston Downtown

The comment letter submitted to the SEC is available here.

1See Inna Abramova, Brandon Gipper & Xuan Su, Shaking the Faith? Frauds across the Globe and Trust in Capital Markets (Oct. 10, 2025), available at https://ssrn.com/abstract=5594850 and Jung Ho Choi, Brandon Gipper, Fraudulent Financial Reporting and the Consequences for Employees, Journal of Accounting and Economics, Volume 78, Issue 1,2024,101673,ISSN 0165-4101, https://doi.org/10.1016/j.jacceco.2024.101673.(go back)

2John Coates, John C. Coffee, Jr., James D. Cox, Merritt B. Fox & Joel Seligman, Shadow SEC Statement No. 8: Comment on SEC Proposal to Allow Companies to File Semiannual Reports on New Form 10-S in Lieu of Quarterly Form 10-Q Filings, CLS Blue Sky Blog (June 1, 2026), https://clsbluesky.law.columbia.edu/2026/06/01/shadow-sec-statement-no-8-comment-on-sec-proposal-to-allowcompanies-to-file-semiannual-reports-on-new-form-10-s-in-lieu-of-quarterly-form-10-q-filings/; Weili Ge, Allison Koester & Sarah McVay, Comment Letter on Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies, Release Nos. 33-11419 & 34-105515, File No. S7-2026-18 (July 1, 2026), https://www.sec.gov/comments/s7-2026-18/s7202618-6476760-1729513.pdf; Melissa F. LewisWestern, Sudipta Basu & Sarah McVay, Comment Letter on Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies, on behalf of the Fin. Reporting Policy Comm., Fin. Acct. & Reporting Section, Am. Acct. Ass’n, Release Nos. 33-11419 & 34-105515, File No. S7-202618 (July 2026), https://www.sec.gov/comments/S7-2026-18/s7202618-959959-2963086.pdf; Shiva Rajgopal, Forester Wong and Wuyang Zhao,Re: File No. S7-2026-18 — Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies (Release Nos. 33-11419; 34-105515), July 12, 2026.https://www.sec.gov/comments/S7-2026-18/s7202618-959159-2961226.pdf;  Daniel Taylor, Mary E. Barth, Wayne R. Landsman & Joe Schroeder, Amendments to the Accelerated Filer and Large Filer Definitions, Harv. L. Sch. F. on Corp. Governance (July 25, 2019), https://corpgov.law.harvard.edu/2019/07/25/amendments-tothe-accelerated-filer-and-large-filer-definitions(go back)

3Weili Ge, Allison Koester & Sarah McVay, Benefits and Costs of Sarbanes-Oxley Section 404(b) Exemption: Evidence from Small Firms’ Internal Control Disclosures, 63 J. Acct. & Econ. 358 (2017)(go back)

4Mary E. Barth, Wayne R. Landsman, Joseph H. Schroeder & Daniel J. Taylor, Commentary on the SEC’s Proposed Exemption to Internal Control Audits Under SOX 404(b) (July 11, 2019) (working paper), https://doi.org/10.2139/ssrn.3535931.(go back)

5See Elizabeth Blankespoor, Ed deHaan & Iván Marinovic, Disclosure Processing Costs, Investors’ Information Choice, and Equity Market Outcomes: A Review, 70 J. Account. Econ. 101344 (2020).(go back)

6John Coates, John C. Coffee, Jr., James D. Cox, Merritt B. Fox & Joel Seligman, Shadow SEC Statement No. 9: Shock and Awe—The Commission’s 1934 Act Blunderbuss Revisions, CLS Blue Sky Blog (June 30, 2026), https://clsbluesky.law.columbia.edu/2026/06/30/shadow-sec-statement-no-9-shock-and-awe-the-commissions-1934act-blunderbuss-revisions/(go back)

7Michael Dambra, Comment Letter on Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies, Release Nos. 33-11419 & 34-105515, File No. S7-2026-18 (July 6, 2026), https://www.sec.gov/comments/S7-2026-18/s7202618-948899-2923386.pdf.(go back)