The SEC Rethinks What—and How Often—Public Companies Must Disclose

The SEC is floating some of the biggest changes to its regulatory framework in two decades, all aimed at the same goal: making it cheaper and less burdensome to be a public company. The most eye-catching piece asks a question that would have been close to heretical a few years ago—do companies really need to tell investors how they’re doing every three months? But the further-reaching change is quieter: a proposal that would sharply cut how much most public companies must disclose at all, executive pay included.

On May 19, the agency released two proposals, a registered offering rule and a filer status rule, intended to make public markets cheaper and easier to access. Together they would have three major effects:

1. It would expand the universe of companies that can avail themselves of shelf registration (that is, the convenient ability to sell shares in batches over time instead of registering anew for every sale) by eliminating seasoning and public-float requirements on Form S-3.
2. It would also raise the threshold for becoming a “large accelerated filer”—and shouldering the heaviest regulatory burden—from $700 million to $2 billion in public float. A company would have to clear that bar for two consecutive years before the heaviest rules apply.
3. It would collapse five overlapping filer categories into two (large accelerated filers and everyone else) and extend scaled-down disclosure obligations to that second, far larger group. By the SEC’s own estimate, 81% of public companies would fall into the lighter-touch bucket, though that portion represents only about 6.5% of total market float.

A separate proposal, floated two weeks earlier on May 5 and the subject of our earlier post, would allow eligible companies to report semiannually instead of quarterly. Taken together, the efforts amount to a two-pronged strategy for lightening the load of being public: the May 5 rule cuts how often companies must report, while the May 19 filer status rule cuts how much they must disclose—and for the great majority of public companies, the second cut is the deeper one.

The filer status rule is where the content cuts go deepest. Companies that drop into the new “non-accelerated filer” category would gain the same scaled disclosure currently reserved for smaller and emerging-growth companies, and the largest savings fall on executive compensation. A non-accelerated filer could disclose pay for three named executives instead of five, give two years of summary compensation data instead of three, and drop the Compensation Discussion and Analysis, the CEO pay-ratio figure, and the pay-versus-performance tables altogether. It would also be excused from the say-on-pay and related shareholder advisory votes, and from the Sarbanes-Oxley auditor attestation on internal controls. For most public companies, in other words, going public would soon mean telling investors substantially less about how their executives are paid.

Sullivan & Cromwell called it the most consequential change to the registered offering framework since 2005. The Wall Street Journal called the disclosure shift a major change aimed at making the public route less burdensome; Reuters framed the offering changes as an effort to revitalize U.S. public markets. Sullivan & Cromwell noted that the latter could be effective in luring some issuers away from private placements like PIPEs.

Chair Paul Atkins has indicated that the proposals are intended to achieve broader objectives as well. He has described the proposals as the backbone of his “Make IPOs Great Again” agenda, aimed at persuading more companies to go public and stay there. Akin Gump reads the whole package as part of a broader political effort to revive IPO activity.

Reactions have been mixed. Supporters say the changes could unlock capital formation and strip out compliance costs that burden emerging companies. Critics argue the reforms weaken transparency for investors, and that thinning executive-pay and other disclosure for 81% of public companies is a steep price for relief that may not even address why companies stay private in the first place. A comment tracker built by an Ohio State professor shows individual investors lopsidedly opposed to the semiannual idea—outnumbering supporters more than 80-to-1 as of this writing—while the big industry groups have asked for more time.

The sharpest comment so far came from an unexpected quarter. r/WallStreetBets, the 18-million-member Reddit forum, filed a widely circulated letter arguing that the quarterly 10-Q is “the great equalizer”: institutions have expert networks, satellite imagery, and credit-card panels to gather intelligence, while ordinary investors have the filing. That logic cuts against the content prong too—whether the data going dark is a quarter’s results or a company’s executive-pay tables, less mandatory disclosure tends to favor the investors who can already afford alternative data. The counterpoint, as the Financial Times has noted, is that the change may matter less than it sounds: the UK dropped mandatory quarterly reporting in 2014, and most companies kept reporting anyway.

Comments are due July 6 on the semiannual reporting proposal, July 20 on the filer status proposal, and July 27 on the registered offering rule. What happens next could shape not only how frequently companies report financial results, but also how public markets balance transparency, compliance costs and access to capital.

For issuers, the proposals could offer greater flexibility and reduce reporting burdens. For investors, particularly retail investors, the debate centers on whether less frequent reporting could limit access to information that supports investment decisions. Even if the rules are ultimately adopted, experience in other markets suggests that many companies may continue reporting quarterly if investors, analysts and market expectations continue to demand it.

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