Regulatory Changes for Smaller Reporting Companies (H.R. 4568)

What is H.R. 4568?

(Updated January 31, 2017)

This bill deals with SEC registration forms and “smaller reporting companies.” Smaller reporting companies are defined as those companies that as of the last business day of their second fiscal quarter have a “public float” of less than $75 million. Public float is defined as the shares of these companies’ publicly traded common stock that is not held by management and certain large investors.

The legislation alters both S-1 and S-3 registration statements. In regard to the S-1, the bill allows smaller reporting companies to automatically update information when something changes, saving these businesses nearly 1,000 hours of labor. In regard to the S-3, the bill would allow certain smaller reporting companies to register, with the SEC, a primary securities offering exceeding one-third of the company’s public float. The bill also changes S-3 registration in a second way by allowing a second group of smaller reporting companies (those without listed and registered “common equity securities”) to register a primary securities offering not exceeding one-third of their public float. 

Argument in favor

Gives smaller public companies access to many of the capital-raising advantages currently enjoyed only by larger companies.

Argument opposed

Allows companies too much manipulation of data, making them appear, to both investors and the SEC, as something they’re potentially not.

Impact

This bill affects smaller reporting companies, and by extension investors and both American and global financial markets.

Cost of H.R. 4568

A CBO cost is unavailable.

Additional Info

Of Note: