Thought Leadership

There’s a New SEC in Town

By October 9, 2018 No Comments
As published in MicroCap Review Magazine

There’s a New SEC in Town


Corey Fischer, CPA


“There’s a new Sheriff in Town.”

Those are words that have sent chills up the spines of micro- and small-cap companies for almost a decade. But the winds have shifted. Companies can take a breath of fresh air. Major regulatory change is happening, and it’s OK.

Nowhere is that more evident than at the Securities and Exchange Commission, where its recently seated chairman, Jay Clayton, has set into motion a new way of doing business. More conscious of the intended as well as the unintended consequences of its actions, the new SEC is fully committed to protecting the public, but intends to do so without choking the life out of the capital markets. Both are possible.

That was fully on display when the SEC Commission adopted amendments earlier this year that changed the definition of a “Smaller Reporting Company (SRC);” a filing status that requires less reporting compliance. Simply said, a lot of bigger companies will now be smaller companies in the eyes of the SEC. And, that’s a very good thing.

Under the SEC’s new definition, a company now can qualify for SRC filing status if it has public float of less than $250 million (formerly $75 million) or alternatively, if it has less than $100 million (formerly $50 million) in annual revenues and a public float of less than $700 million (formerly no public float).

Companies that qualify as a SRC do not need to comply with the stiffer disclosure rules required by their larger company brethren. The scaled disclosure requirements for smaller reporting companies permit less extensive narrative disclosures, particularly in the description of executive compensation. It also permits them to provide audited financial statements for two fiscal years, instead of three.

Although qualifying as a SRC does not automatically make a registrant a non-accelerated filer, Mr. Clayton has directed his staff to formulate recommendations to the Commission for possible additional changes to the “accelerated filer” definition that, if adopted, would reduce the number of accelerated filers and provide a healthy reduction in compliance costs.

Until that happens, it should be noted that changing filer status to smaller reporting company  does not necessarily exempt companies from section 404(b) of the Sarbanes-Oxley Act, which requires an auditor’s attestation of the adequacy of a company’s internal financial statement and disclosure controls — something deregulation advocates wanted changed, but did not happen.

Upon adoption of the new rules, Chairman Clayton said, “Expanding the smaller reporting company definition recognizes that a one-size regulatory structure for public companies does not fit all. These amendments to the existing SRC compliance structure bring that structure more in line with the size and scope of smaller companies while maintaining our long-standing approach to investor protection in our public capital markets.”

It is encouraging to hear the head of a regulatory agency speak about fostering economic growth and more efficient markets while concurrently committing to protecting the public. It is a very different posture for an agency that for too long measured its success by the number of its enforcements and the fines it collected.

Unlike many of his recent predecessors, Chairman Clayton comes to the position from the business community, not as a former prosecutor. It should not be surprising that he would seek solutions in the marketplace rather than the courthouse.


Corey Fischer, CPA, is Firm Managing Partner of Weinberg & Company, a multi-office, PCAOB and CPAB-Registered firm specializing in the audit, assurance and tax needs of micro and small cap companies.  He has more than 25 years of experience, having worked with the Big 4 accounting firms, and as an SEC reporting officer for a number of NASDAQ-listed companies.  Based in Los Angeles, he is an expert in financial reporting, SEC compliance, raising debt and equity, mergers and acquisitions and structuring accounting operations. E-mail: or 310-601-2200. Visit