The advisory committee to the Securities and Exchange Commission on smaller public companies is set to meet this week in New York for the first of two meetings scheduled for October.
Thyen
On Friday, the group’s members will hold a fact-finding meeting, where they will hear from additional small cap investors. Committee co-chair James Thyen, CEO of Kimball International Inc., told Compliance Week that most of the panelists at that meeting will represent small capital investment funds, “a voice we felt had not been appropriately represented in past meetings.” Thyen said no interim recommendations are expected as a result of the Oct. 14 meeting.
The 21-member advisory group was created last year to examine the impact of the federal securities laws, including Sarbanes-Oxley, on smaller public companies. The committee’s work has been closely watched, as its recommendations are expected to hold significant weight with the SEC; the committee is due to make its final report to the Commission in April.
The advisory panel is slated to meet again on Oct.24 in Washington, D.C., to consider final subcommittee recommendations. After that, the group is supposed to being drafting its final report.
Committee member Rick Brounstein told Compliance Week, “There will be more proposals before the committee is done. Having defined size, we now will build recommendations for companies falling in those ranges.”
In August, the advisory committee proposed a definition of “smaller” under which the bottom 6 percent of all companies based on total U.S. public market capitalization would be categorized as “small,” while the bottom 1 percent would be considered “microcap.” Brounstein said that the advisory committee will use its own definitions in making its recommendations.
“What they ultimately do with their recommendations is their decision,” Brounstein said, referring to the SEC. “But for our purposes we will use our definitions to make our recommendations.”
The group also recommended in August that the SEC ease the regulatory burden on smaller companies by delaying for one year the effective date of internal control reporting requirements for non-accelerated filers, giving those companies until their first fiscal year ending on or after July 15, 2007, to comply with SOX Section 404. The committee also told the SEC it should scrap or postpone for smaller companies the final phase-in of rules that would accelerate the deadlines for various periodic reports following the period-ending dates.
Last month, at its Sept.21 open meeting, the SEC approved delaying 404 for non-accelerated filers for another year, in line with the advisory committee’s recommendation. At that meeting, the SEC also proposed, among others, amendments that would create a new category of filers, “large accelerated filers,” for companies that have a public float of $700 million or more and meet the same other conditions that apply to accelerated filers, and proposed redefining “accelerated filers” as companies that have at least $75 million but less than $700 million in public float.
The SEC also proposed changes to the final phase-in of accelerated periodic report filing deadlines for the largest filers, and scrapped them altogether for other filers. Under those proposed amendments, large accelerated filers would become subject to a 60-day Form 10-K annual report deadline, while accelerated filers would maintain the current 75-day Form 10-K annual report deadline. Both groups would be subject to a 40-day Form 10-Q quarterly report deadline.
Compliance Week has coverage those developments extensively, and that coverage is available from the box above, right.
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