On May 19, 2026, the U.S. Securities and Exchange Commission (SEC) proposed significant changes to the way public companies are categorized for federal securities law reporting purposes. The proposed rules and form amendments would simplify the existing filer status framework, extend scaled disclosure and other accommodations to most public companies, and extend periodic reporting filing deadlines for the smallest public companies. The proposal was released as part of a pair of proposed rulemakings the SEC called “transformative reforms” aimed at incentivizing companies to go and stay public, the foundation of SEC Chairman Paul Atkins’ agenda to “Make IPOs Great Again.” For information about the SEC’s proposed rules and amendments governing registered offerings, see Covington’s client alert linked here.
Below we summarize the key elements of the proposed changes and suggest practical steps companies can consider taking now.
The proposed amendments would create two primary filer status categories—large accelerated filers (LAFs) and non-accelerated filers (NAFs)—and eliminate the existing filer status categories for accelerated filers (AFs) and smaller reporting companies (SRCs). The proposal would not affect the statutorily-based emerging growth company (EGC) category, although it would make most of the benefits of EGC status available to all NAFs. According to the SEC, if the proposed amendments were in effect today, 19.2 percent of all current public companies would be LAFs (compared to 35.4 percent currently), and 80.8 percent would be NAFs.[1]
Key changes to the existing framework are as follows:
- The expanded NAF definition would extend the benefit of the full range of current SRC and EGC scaled disclosure accommodations to most public companies. This includes scaled executive compensation disclosure, including no requirement for compensation discussion and analysis, fewer tabular and narrative disclosure requirements and no pay versus performance disclosure, fewer years of audited financial statements (with reduced presentation requirements), no auditor attestation requirement with respect to internal control over financial reporting (ICFR), and no say-on-pay or say-on-frequency votes We discuss these accommodations in more detail below.
- Every newly public company would have at least a five-year on ramp as a NAF. The requisite period after which a public company could potentially be categorized as an LAF would increase from 12 consecutive calendar months under the current rules to 60 consecutive calendar months following the month in which a company becomes subject to the reporting requirements of the Securities Exchange Act of 1934 (the Exchange Act).
- The public float threshold for LAF status would nearly triple. The proposal would raise the threshold from $700 million to $2 billion, resulting in most public companies being classified as NAFs.
- The LAF threshold would be calculated based on an average stock price over 10 trading days, rather than a single day’s closing price. The current rules measure public float for purposes of determining LAF status on a single day—the last business day of a company’s second fiscal quarter. The proposed rules would instead use the average closing price (or, if applicable, the average of bid and ask if no closing price is available) over the last 10 trading days of a company’s second fiscal quarter, multiplied by the aggregate number of shares of voting and non-voting common equity held by non-affiliates as of the last day of the second fiscal quarter. This change is designed to mitigate the impact of temporary shifts in stock price that could otherwise unexpectedly affect a company’s filer status.
- Filer status does not change for at least two consecutive years. A company would only transition into or out of LAF status after its public float has been above or below the $2 billion threshold as of the end of each of a company’s two most recent second fiscal quarters. Along with this change, the proposal would also eliminate the current separate, lower exit thresholds for transitioning out of LAF or AF status—a feature that has contributed significantly to the complexity of the existing rules. Instead, the proposal would use a single $2 billion threshold with a two-year lookback for both entry and exit, providing additional predictability for public companies.
- The AF and SRC categories would be eliminated. NAF status would become the default for all reporting companies unless they satisfy the LAF conditions. The NAF category would absorb and replace the current AF and SRC categories. Except for a proposed new category of the smallest public companies (described below), the filing deadlines for NAFs would remain unchanged from the current rules: 90 days after fiscal year end for Form 10-K annual reports and 45 days after fiscal quarter end for Form 10-Q quarterly reports, thus extending the reporting deadlines for current AFs.
- A new “small NAF” subcategory would provide extended filing deadlines for the smallest companies. NAFs with total assets of $35 million or less[2] for the two most recent fiscal years would be categorized as “small NAFs” and receive an additional 30 days to file Form 10-K (extending the deadline to 120 days) and an additional five days to file Form 10-Q (extending the deadline to 50 days).
One of the most significant aspects of the proposal is the extension of scaled disclosure requirements and other accommodations currently available to SRCs and EGCs to all NAFs. Under the proposal, a majority of the companies currently classified as AFs or LAFs would transition to NAF status and thereby benefit from a material reduction in their disclosure obligations. (As under current rules, a NAF could elect to comply with some or all of the more rigorous disclosure obligations applicable to LAFs.) The principal accommodations available to NAFs would include:
- Scaled financial statements and MD&A. NAFs would be permitted to prepare their financial statements on a slightly more condensed basis in accordance with Article 8 of Regulation S-X, and would only be required to include two (instead of three) years of audited financial statements in annual reports and registration statements. Further, NAFs would only need to include two years of corresponding MD&A disclosure and also would be able to benefit from more flexible age of financial statement requirements.
- No required auditor attestation of ICFR. NAFs would not be required to obtain an auditor’s attestation on management’s assessment of the effectiveness of internal control over financial reporting as contemplated by section 404(b) of the Sarbanes-Oxley Act of 2002 (SOX). The other provisions of SOX section 404 would continue to apply.
- Significantly reduced executive compensation disclosures. NAFs would be permitted to provide executive compensation disclosure for fewer named executive officers (three instead of five, generally), provide two (instead of three) years of data in their Summary Compensation Table, and would not be required to comply with several other executive compensation disclosure rules, including those requiring a compensation discussion and analysis, pay ratio disclosure, pay versus performance disclosure, and certain other compensation-related tables.
- No required shareholder advisory votes. NAFs would be exempt from the requirements to conduct say-on-pay, say-on-pay frequency, and golden parachute compensation advisory votes.
- Other disclosure accommodations. NAFs would not be required to provide risk factor disclosure in Forms 10-K and 10-Q, performance graph disclosure, supplementary financial information, quantitative and qualitative disclosures about market risk, disclosure of policies for approving related party transactions, compensation committee interlocks and insider participation disclosure, or certain other disclosures.
- New or revised accounting standards. For a five-year period following the initial registration of securities under the Exchange Act, all NAFs would be permitted to irrevocably elect to defer compliance with certain new or revised financial accounting standards issued by the Financial Accounting Standards Board, consistent with the same accommodation currently available to EGCs.
- Material unresolved SEC staff comments. Notwithstanding the scaled disclosures, the proposal would require all NAFs to disclose in their annual reports the substance of material unresolved SEC staff comments received at least 180 days before fiscal year end — a little used requirement currently applicable only to LAFs, AFs, and well-known seasoned issuers.
As proposed, companies would be required to initially assess their new filer status as of the end of their fiscal year prior to the effective date of the final rules, based on public float (and, if applicable, total assets) measured as of the second fiscal quarter for such fiscal year and the immediately prior fiscal year. Companies would be permitted to initially assess their filer status at any time after effectiveness of the final rules, but no later than the day prior to the last day of their fiscal year in which the final rules go into effect. For example, if the proposed rules and amendments are adopted and become effective on January 15, 2027, then existing calendar year end companies would be required to assess their filer status as of December 31, 2026 no later than December 30, 2027, but would be permitted to complete such assessment as of any date between January 15 and December 30, 2027. After assessing filer status, companies could begin availing themselves of scaled disclosures and other accommodations (as applicable) in their next filing.
Existing companies would not carry forward their prior filer status for purposes of the initial assessment. This means that a current LAF with public float below $2 billion, or that has not been a reporting company for 60 consecutive calendar months, would become an NAF upon effectiveness of the proposed rules. Existing LAFs and AFs may choose to continue reporting subject to their current requirements if preferred.
The proposed amendments would affect virtually every domestic public reporting company, though the nature and degree of impact would vary:
- All current AFs and current LAFs with public float between $700 million and $2 billion would transition to NAF status and thereby be able to take advantage of the full range of scaled disclosure and other accommodations, described in greater detail above.
- Current SRCs would transition to NAF status but would generally see little substantive change in their disclosure obligations, as the NAF accommodations would closely mirror their current requirements, but would benefit from some incremental disclosure accommodations that under current rules are available only to EGCs.
- Newly public companies would benefit from a minimum five-year on-ramp as NAFs before potentially becoming subject to LAF requirements, regardless of their size.
- The largest public companies (public float of $2 billion or more, with at least 60 months of seasoning) would continue as LAFs and would see no reduction in their disclosure obligations.
Monitor related rulemaking. The SEC notes that this proposal is being made in conjunction with a separate proposing release on reforms to the securities offering process that would make Form S-3 and shelf offerings available to significantly more issuers. Companies should track both proposals as they move through the rulemaking process, as they are designed to work in tandem. SEC rulemaking has continued apace in 2026 with the SEC also recently proposing to permit public companies to elect to file periodic reports on a semiannual instead of a quarterly basis. If adopted as proposed, these rulemakings, taken together, would alter the timing and content of public communications required by public companies. See Covington’s client alert on the semiannual reporting proposal here.
Engage with the SEC. Companies that are supportive of the proposed changes or have additional viewpoints for the SEC to consider are highly encouraged to engage in the SEC’s comment process.
If you have any questions concerning the material discussed in this client alert, please contact the following members of our Securities and Capital Markets practice.
[1] Foreign private issuers (FPIs) that elect to file reports in accordance with the rules and forms designated for FPIs (Form 20-F and Form 40-F) would not be categorized under the LAF and NAF definitions. FPIs filing on Form 20-F would continue to be required to provide an ICFR auditor attestation if they have a public float of $75 million or more, unless they qualify as an EGC.
[2] The proposed rules would also revise the SEC’s definitions of “small entity” for purposes of the Regulatory Flexibility Act, raising the total asset threshold from $5 million to $35 million to align with the proposed small NAF threshold.
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