Smaller Reporting Companies
The Smaller Reporting Companies page offers information to help management teams and their service and solution providers.
Effective February 4, 2008 the SEC eliminated the Small Business Form types by amending Regulation S-K to include a "Smaller Reporting Companies" scaled disclosure requirements securities regulatory regime.
Under these new rules all companies that have a public equity float of less than $75 million will qualify for scaled disclosure.
Overview of the Smaller Reporting Companies Page
The effective dates in the list below reveal that SEC Smaller Reporting Companies is a new capital market segment. Over time this page will identify factors that drive organizing and developing the Smaller Reporting Companies segment..
Emergence of Smaller Reporting Companies Capital Market Segment
Capital market observers attribute market segmentation to factors such as risk, application of regulatory regimes, the emergence of specialists, distinct business practices and processes and the production of credible information that can be analyzed.
The process of discovering and evaluating these factors enables identifying frameworks that support organizing and developing distinct capital market segments. There is a correlation between business and investment risk and capital market segmentation.
Generally speaking companies that may benefit by the “smaller reporting companies” regulatory regime will tend to be thinly capitalized and have more fragile business and operating models than companies that trade in upper tier capital markets.
Creating the “Smaller Reporting Companies” regulatory regime generates a need to aggregate emerging information and undertake research to identify new arrays of analytics, base line measurements and metrics before the effectiveness of this new segment may be determined.
Smaller Reporting Companies Macro Facts
Additional marco facts will be added to this section as they become available.
Identifying “Smaller Reporting Companies” Specialists
Directories to identify securities attorneys, auditors and service or solution providers who work in the Smaller Reporting Companies category are being built.
In the past it was relatively easy to identify these specialists by reviewing SB-2 registration statements and 10KSB filings. Several information services (Audit Analytics, Edgar Online, 10K Wizard, etc.) augmented these efforts because their services aggregated information by Form Type (SB-2 /10KSB). Currently, it is not clear how long it will take before information providers begin generating Smaller Reporting Companies information.
Building directories of specialists who work in the Smaller Reporting Companies category helps management teams benefit from the Smaller Reporting Companies regulatory regime.
Attorneys, auditors, service and solution providers who work in the smaller reporting companies segment please send your contact information to bradsmith@smecapitalmarkets.net
Smaller Reporting Companies Data and Information Sources
As information producers articulate plans to present information about the Smaller Reporting Companies segment it will be added to this section.
Smaller Reporting Companies Compliance, Governance and Research Information List
This list is being built as a resource for smaller company managment teams. Please use the input form to add relevant items to the list.
Smaller Reporting Companies Information List Input Form
Smaller Reporting Companies Compliance, Governance and Research Information List
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| Compliance & Disclosure Interpretations
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http://www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm
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Effective July 3, 2008 SEC Corp Fin issued a new set of Compliance & Disclosure Interpretations ("C&DIs") C&DIs comprise the Division's interpretations of Regulation S-K. They replace the interpretations of Regulation S-K and Regulation S-B published in: The July 1997 Manual of Publicly Available Telephone Interpretations; The March 1999 Interim Supplement to the Manual of Publicly Available Telephone Interpretations; The November 2000 Current Issues and Rulemaking Projects Outline; The 2007 C&DIs on Items 201, 402, 403, 404 and 407; and The March 2008 C&DIs on smaller reporting companies. This new set of C&DIs consolidates all of the existing Reg. S-K CDIs and adds some new ones, including a few under Item 402. It also re-numbers all of the CDIs.
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| Lord & Benoit: Sarbanes-Oxley Investment, A Section 404 Cost Study for Smaller Public Companies
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http://www.section404.org/UserFiles/File/LordandBenoitReport-TheSarbanes-OxleyInvestment%20(revised1-11-08).pdf
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Lord & Benoit, a SOX research and consulting firm, recently gathered empirical cost data to answer a crucial question that government officials, legislators, and business executives have been asking since June of 2007: "what exactly is the cost for a smaller public company to comply with Sarbanes-Oxley Section 404(a) and Section 404(b) regulations using the latest guidance issued by the SEC and PCAOB?" The data reveal that for non-accelerated filers, the total average first-year cost for management assessment and additional audit fees is $78,474, which is 13.8% less than the $91,000 cost the SEC initially predicted. The new Lord & Benoit Report, entitled "The Sarbanes-Oxley Investment: A Section 404 Cost Study for Smaller Public Companies," is based on a cross-section of 29 smaller public companies in the semiconductor, manufacturing, distribution, banking and finance, real estate, food and beverage, transportation, mining, software, energy, services, and biotech industries. The Report is also based on an Audit Analytics study of actual audit fees reported by nearly 5,500 public companies.
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| Rand: Do the Benefits of Sarbanes-Oxley Justify the Costs? Empirical Evidence in the Case of Small Firms
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http://www.rand.org/pubs/research_briefs/RB9295/index1.html
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In the Name of Entrepreneurship? The Logic and Effects of Special Regulatory Treatment for Small Businesses (2007), RAND researchers address the impact of SOX and other regulations on small firms. One of the book’s chapters, “Sarbanes-Oxley’s Effect on Small Firms: What Is the Evidence?” focuses specifically on three areas in which the effects of SOX are susceptible to empirical measurement: relative compliance for small firms compared to those for large firms, stock-price reactions, and changes in firms’ (particularly small firms’) propensity to leave the public capital market. The chapter’s authors concluded that SOX has had a mixture of negative and positive effects on small firms, but which effects will prove more significant in the future is, as yet, unknown.
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| SEC Approves One-Year Extension for Small Businesses From Auditor Attestation Requirement in Sarbanes-Oxley Act - Jun. 20, 2008
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http://www.sec.gov/news/press/2008/2008-116.htm
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SEC Staff Gains OMB Approval to Proceed With Data Collection for Cost-Benefit Study of SOX 404 Implementation
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| SEC Begins Small Business Costs and Benefits Study of Sarbanes-Oxley Act Section 404
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http://www.sec.gov/news/press/2008/2008-8.htm
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Feb. 1, 2008 - The Securities and Exchange Commission today announced that its professional staff has commenced a cost-benefit study of an upcoming auditor attestation requirement for smaller companies under Section 404(b) of the Sarbanes-Oxley Act of 2002. The study will collect and analyze extensive "real world" cost and benefit data from a broad array of companies currently complying with Section 404 under newly-issued guidance for companies and auditors. The new guidance for management and the new auditing standard were intended to reduce the compliance costs of Section 404 while strengthening its focus on material controls. In addition to assessing the Section 404 cost reductions resulting from the Commission's recent actions, the final report also will inform any decision to improve the efficiency and effectiveness of Section 404 implementation.
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| SEC Division of Enforcement Enforcement Manual Office of Chief Counsel October 6, 2008
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http://www.sec.gov/divisions/enforce/enforcementmanual.pdf
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Securities and Exchange Commission Division of Enforcement Enforcement Manual Office of Chief Counsel October 6, 2008 > http://www.sec.gov/divisions/enforce/enforcementmanual.pdf
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| SEC Small Entity Compliance Guide, January 25, 2008
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http://www.sec.gov/info/smallbus/secg/smrepcosysguid.pdf
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SEC: Changeover to the SEC’s New Smaller Reporting Company System by Small Business Issuers and Non-Accelerated Filer Companies A Small Entity Compliance Guide, January 25, 2008 > http://www.sec.gov/info/smallbus/secg/smrepcosysguid.pdf
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| SEC SMALLER REPORTING COMPANY REGULATORY RELIEF AND SIMPLIFICATION
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http://www.sec.gov/rules/final/2007/33-8876.pdf
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Effective February 4, 2008 the SEC eliminated the Small Business Form types by amending Regulation S-K to include a "Smaller Reporting Companies" scaled disclosure requirements securities regulatory regime. Under these new rules all companies that have a public equity float of less than $75 million will qualify for scaled disclosure. After the effective dates, small business issuers and non-accelerated filers will be grouped under the "Smaller Reporting Companies" category.
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| SEC SOX Small Business Guide
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http://www.sec.gov/info/smallbus/404guide.shtml
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Section 404 of the Sarbanes-Oxley Act requires public companies' annual reports to include the company's own assessment of internal control over financial reporting, and an auditor's attestation. Since the law was enacted, however, both requirements have been postponed for smaller public companies. The requirement of an auditor's attestation won't apply to most smaller public companies until their 2008 annual reports. The 2007 annual report will be the first year that the management assessment will need to be included. This brochure is designed to help make the first time easier
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| THE INITIAL PUBLIC OFFERING A Guidebook for Executives and Boards of Directors
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http://www.bowne.com/assets/pdf/securitiesconnect/InitialPublicOffering3rdEdition_Bowne.pdf
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Third Edition PATRICK J. SCHULTHEIS ROBERT G. DAY J. RANDALL LEWIS SHAWN J. LINDQUIST ROBERT G. O’CONNOR WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION
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