Corporate, Mergers & Acquisitions, and Securities

The U.S. Securities and Exchange Commission (SEC) released two proposing releases on May 19 that, taken together, amount to a significant attempt to make the public-company pathway more workable, more flexible, and less expensive. One proposal focuses on making it easier to raise capital after becoming public, primarily by expanding access to Form S-3, shelf registration, at-the-market (ATM) offerings, and many of the benefits long associated with well-known seasoned issuer (WKSI) status. The other release focuses on making it easier to live as a public company by simplifying filer categories, moving more issuers into scaled-disclosure status, and relieving a much broader group of companies from certain disclosure and compliance burdens, including Sarbanes-Oxley Act (SOX) 404(b) auditor attestation. These proposals expressly fit into the SEC’s larger reform agenda, which includes the commission’s separate semiannual reporting proposal from earlier in the month, aimed at reducing the pressure and cost of quarterly reporting.

Topics Covered

• The First Proposal: Broadening Access to Registered Capital-Raising
• The Second Proposal: Simplifying Filer Status and Reducing the Cost of Being Public
• What Companies Should Be Doing Now to Prepare
• What’s Next?

The broader policy backdrop is clear from the releases: the SEC believes the public markets have become less attractive relative to private markets, and that regulatory friction is part of the reason. The filer-status release expressly notes that the number of Securities Exchange Act of 1934, as amended (Exchange Act), reporting companies filing on domestic forms fell from 6,996 in 2004 to 5,976 in 2024, while private markets saw significant growth and “regularly outpac[ed] public markets in capital raised.” The SEC also points to evidence and market feedback that compliance burdens, quarterly reporting pressure, and the complexity of the filer-status framework have become obstacles to companies going and staying public.

In practical terms, the SEC is attempting to rebalance the public-versus-private decision by reducing the cost and rigidity of public-company life without abandoning investor protection.

The First Proposal: Broadening Access to Registered Capital-Raising

The “Registered Offering Reform” proposal is fundamentally about removing barriers that currently prevent many companies from using the SEC’s most efficient capital-raising tools. The proposal would make Form S-3 available to many more issuers, extend shelf and ATM flexibility, broaden WKSI-like benefits to a much larger exchange-listed population, modernize Form S-1, and preempt state registration and qualification requirements for all registered offerings.

Form S-3 Would Become Meaningfully More Available

Currently, Form S-3 eligibility depends on both registrant requirements and transaction requirements, including the familiar $75 million public-float threshold for unlimited primary offerings. The SEC proposes to eliminate the transaction requirements entirely, including the $75 million public-float requirement, so that any issuer meeting the revised registrant requirements could use Form S-3 for any primary or secondary offering. The SEC also proposes to eliminate the current one-year Exchange Act seasoning requirement for Form S-3 eligibility, as well as certain other requirements tied to payment defaults and electronic-filing compliance, while retaining current and timely reporting requirements and adding exclusions for certain ineligible issuers.

It is worth noting that the one-year seasoning requirement is not simply dropped but instead replaced by a timeliness test: Under the proposed amendments, an issuer must have timely filed all required Exchange Act reports during the preceding 12 calendar months (or for the shorter period it has been subject to reporting requirements). This means a company that begins Exchange Act reporting could immediately use Form S-3, but only so long as it has been current and timely in its filings from the outset.

If adopted, a much larger universe of reporting issuers — including smaller public companies, newer reporting companies, and issuers currently constrained by the baby-shelf one-third cap — could access shelf registration and use Form S-3 as their default capital-raising form. The likely implication is not merely technical. For many companies, the current inability to use Form S-3 means slower execution, more disclosure duplication, and greater dependence on more expensive private financing structures. The SEC is signaling that this distinction has become too rigid for modern markets.

Shelf Registration and ATM Programs Would Become More Useful for More Issuers

Because Form S-3 eligibility is the gateway to shelf registration under Rule 415 (delayed or continuous offerings) of the Securities Act of 1933 (Securities Act), the proposal would give many more companies the ability to register securities in advance and take them off the shelf opportunistically when market conditions justify it. The same is true for ATM offerings: The release makes clear that broader S-3 eligibility would expand ATM access as well, while Rule 415(a)(4) would be revised to define a “trading market” as a national securities exchange or another market designated by the SEC using specified attributes.

Shelf access is not just about convenience; it changes how issuers approach opportunistic raises, capital planning, market timing and the balance between public and private capital. For companies that currently live closer to the edge of market windows or that have recurrent capital needs, these changes could materially reduce execution risk.

Domestic WKSI Status Would Be Replaced with a Broader Exchange-Listed Framework

The proposal would replace domestic-issuer reliance on WKSI status with two new concepts: the eligible listed issuer (ELI) and the seasoned eligible listed issuer (SELI). An ELI would be an exchange-listed issuer that meets the revised Form S-3 registrant requirements. Importantly, “exchange-listed” for this purpose means the issuer has at least one class of common equity securities listed on a national securities exchange — an issuer listed only through debt, preferred stock or warrants would not qualify. A SELI would be an ELI that has been subject to Exchange Act reporting for at least 12 calendar months and any portion of a month immediately preceding the relevant measurement date.

Under the proposal, ELIs would get many of the current WKSI benefits — including broader pre- and post-filing communications flexibility, the ability to omit more information from a base prospectus under Rule 430B(a), pay-as-you-go filing fees, and the ability to add securities or classes later through automatically effective post-effective amendments under Rule 413(b). SELIs alone would get automatic shelf registration.

This is a significant policy shift. The SEC is moving away from using a large public-float threshold as the principal proxy for market following and disclosure reliability and instead is tying most of these benefits to exchange listing and reporting compliance. The point here is important: The SEC seems to have concluded that the old float-based test is too blunt a tool. If an issuer is exchange-listed, current and timely in reporting, the SEC appears increasingly willing to trust the market and the federal disclosure system to do the rest.

The Registered Fund and BDC Component: Extending the Same Logic to Form N-2

One of the more notable features of the Registered Offering Reform release is that the SEC is not limiting these proposed accommodations to operating companies. It is expressly proposing to modify the registration, communication and offering process for certain business development companies (BDCs) and registered closed-end funds that register securities on Form N-2. The release states these changes are intended to “allow a greater number of affected funds to raise capital more efficiently and would provide more affected funds flexibility to manage the timing of their offerings in response to market opportunities.”

The release explains that the SEC is proposing to expand the eligibility requirements to use the short-form shelf registration statement on Form N-2 (Short-Form N-2) to affected funds that qualify as ELIs or SELIs under the same new exchange-listed framework being proposed for operating companies. The current framework ties Short-Form N-2 access to a combination of current/timely reporting and the Form S-3 transaction requirements, including the $75 million public-float threshold. The proposal would move away from that float-based test and instead permit exchange-listed affected funds that satisfy the relevant registrant requirements to use the short-form shelf regime. Removal of the float threshold would allow smaller closed-end funds to engage in ATM offerings in reliance on Rule 415(a)(1)(x), which could allow even the smallest of closed-end funds to increase their equity capital in a way that is presently not available.

For listed BDCs and exchange-listed closed-end funds, this could materially improve capital-raising flexibility. More of these vehicles could access shelf offerings and the related efficiencies of short-form registration, without being blocked by a public-float test that may be poorly aligned with how these issuers actually operate in the market.

Form S-1 Would Become Less Cumbersome for Follow-On Use

The proposal would also modernize Form S-1. It would eliminate the requirement that an issuer must have already filed a Form 10-K for its most recently completed fiscal year before it can use incorporation by reference, and it would allow all issuers meeting Form S-1’s incorporation-by-reference conditions — not just smaller reporting companies (SRCs) — to forward-incorporate future Exchange Act reports into the registration statement.

This matters most for newly public companies and other issuers that, even after the S-3 reforms, may still rely on S-1 for certain offerings. The SEC has seemingly made an effort to make S-1 less of a deadweight filing and more of a modern registration form for post-initial public offering (IPO) capital-raising where S-3 is unavailable or not yet used.

Blue-Sky Preemption for All Registered Offerings

One of the more consequential but less immediately visible changes is the SEC’s proposal to define “qualified purchaser” under Securities Act Section 18(b)(3) so that all registered offerings would become covered securities for purposes of state registration and qualification preemption. The practical effect would be to eliminate state blue-sky registration and qualification requirements for registered offerings of unlisted securities, while preserving state anti-fraud enforcement and notice authority as provided by Section 18(c).

For issuers and deal counsel, this could be a major transactional simplification. For offerings of unlisted securities in particular, multistate blue-sky review can introduce legal spend, delay and complexity that is disproportionate to its incremental value where the SEC’s federal registration regime already applies. The proposal’s new definition of “qualified purchaser” for purposes of securities-offering preemption has particular importance for non-traded BDCs. The release specifically identifies non-traded BDCs as an example of issuers whose securities currently are not “covered securities” because they are neither exchange-listed nor issued by registered investment companies. If all registered offerings become covered securities through the proposed qualified-purchaser definition, state securities registration and qualification requirements would be preempted for those offerings as well.

This change may be one of the most important fund-side implications of the release for non-traded BDCs. Even where the Form N-2 shelf changes do not apply directly, the blue-sky preemption piece will significantly reduce cost and timing burdens in registered offerings by BDCs, allow for streamlined product development, and put such BDCs on an equal footing with closed-end tender offer funds and closed-end interval funds.

The Second Proposal: Simplifying Filer Status and Reducing the Cost of Being Public

If the offering reform proposal is about making public capital formation easier, the second release — “Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies” — is about making public-company compliance less burdensome once a company is public.

Five Filer Categories Would Be Collapsed Into Two Principal Ones

The filer-status proposal describes the current framework as “layered and complex,” with five filer statuses — large accelerated filer (LAF), accelerated filer (AF), non-accelerated filer (NAF), smaller reporting company (SRC) and emerging growth company (EGC) — often overlapping in ways that issuers and advisers find hard to navigate. The SEC proposes to simplify the system into two main categories: LAFs and NAFs, with AF and SRC status eliminated. EGC status formally survives — it was created by Congress in the Jumpstart Our Business Startups (JOBS) Act and cannot be eliminated by SEC rulemaking — but the proposal extends substantially all EGC accommodations to all NAFs, making separate reliance on EGC status unnecessary in most cases. One EGC accommodation is not extended to NAFs: the ability to exclude nonpublic draft registration statements from Freedom of Information Act (FOIA) production. The checkbox disclosure on periodic reports and registration statements identifying an issuer as an EGC would also remain.

This is another major policy statement. It reflects a judgment that the current architecture has become too complicated and that complexity itself imposes cost and friction. For many general counsel, that rings true. The rules that determine filing deadlines, executive compensation disclosure, internal control over financial reporting (ICFR) attestation and scaled financial disclosure are not just technical; they directly affect budgeting, audit planning, board committee work and market timing.

LAF Threshold Would Jump to $2B and Become More Stable

The SEC proposes to redefine LAF status by increasing the public-float threshold from $700 million to $2 billion, using a 10-trading-day average-price methodology, requiring the threshold to be met for two consecutive years, and imposing a 60-calendar-month Exchange Act seasoning requirement before LAF status can attach. The $2 billion figure is not an inflation adjustment — the release acknowledges that a straight inflation adjustment from the original $700 million threshold would yield approximately $1.15 billion, while a proportionate market-cap adjustment would yield approximately $3.85 billion. Instead, the SEC chose $2 billion to reestablish approximately the same ratio of market-cap coverage (roughly 93.5%) that the original $700 million threshold captured when adopted in 2005. Commenters who disagree with the $2 billion level should focus on this calibration methodology.

The practical implication is straightforward: Fewer issuers will be LAFs and more will be NAFs. The SEC expressly notes that LAFs currently account for only a portion of issuers but the overwhelming majority of total market public float, and the proposal is designed to reserve the heaviest obligations for the largest companies. For many existing AFs and lower-end LAFs, that likely means a migration into NAF status and associated compliance relief.

NAF Status Would Become the Principal Scaled-Disclosure Category

Under the proposal, NAF would be expressly defined to mean any issuer that is not an LAF. The SEC would then extend to all NAFs the scaled disclosures and accommodations currently available to SRCs and certain accommodations now available to EGCs.

This includes, among other things:

• Scaled financial statement requirements, including the ability for many NAFs to use Article 8 of Regulation S-X.
• Scaled executive compensation disclosure, including fewer named executive officers (NEOs) and fewer years of summary compensation table disclosure (two versus three).
• Omission of certain periodic-report risk factor disclosure, supplementary financial information and market-risk disclosure for NAFs.
• Reduced corporate governance disclosure in certain areas.
• Elimination of pay-versus-performance and certain say-on-pay-style requirements for NAFs through extension of EGC-like accommodations.

The big takeaway is that the SEC is moving toward a world where most issuers outside the very top tier would have a genuinely lighter public-company disclosure package.

Many More Issuers Would No Longer Need SOX 404(b) Auditor Attestation

One of the clearest compliance-burden reductions is the expansion of the population exempt from SOX 404(b) auditor attestation. Because only LAFs would remain in the top tier, more issuers would fall outside Section 404(b)’s practical reach under SEC rules, although management’s own Section 404(a) assessment would still be required.

This proposal is likely to attract strong market attention, because 404(b) is one of the most expensive and operationally intrusive features of being public for smaller issuers. The SEC directly acknowledges the cost concerns and the disproportionate burden on smaller companies, even while also recognizing the investor-protection value of auditor attestation.

The practical observation here is that the SEC is not eliminating internal-control reporting; it is saying that the market may not need the full auditor-attestation overlay for companies outside the largest public-float tier.

The Smallest NAFs Would Get More Filing Time

The proposal would create a subcategory called small non-accelerated filers (SNFs) for NAFs with total assets of $35 million or less as of the end of each of the two most recent second fiscal quarters. These issuers would get 120 days, rather than 90, to file Form 10-K, and 50 days, rather than 45, to file Form 10-Q. Consistent with the LAF entry and exit mechanism, SNF status would also use a two-consecutive-year stability test based on the total asset threshold — a registrant exits SNF status only after its total assets exceed $35 million as of the end of each of its two most recent second fiscal quarters. Companies hovering near the $35 million asset threshold should factor this stability mechanism into their compliance planning.

What Companies Should Be Doing Now to Prepare

Even at the proposal stage, there are several concrete steps that public companies should consider.

Rerun Your Company’s Status Under Both Current and Proposed Frameworks

Every public company should evaluate:

• Whether it would be an LAF or NAF under the proposed filer-status rules.
• Whether it would qualify as an ELI or SELI under the offering reform proposal. (The distinction matters: ELIs get most former WKSI benefits, but automatic shelf registration under Rule 462 is available only to SELIs.)
• Whether it would become newly eligible for Form S-3.
• Whether it would become newly free from the baby-shelf one-third cap.
• Whether it would cease to be subject to SOX 404(b) auditor attestation.

For many issuers, the answer may be “yes” to more than one of those questions. If so, the combined effect could be material.

Audit Exchange Act Filing Timeliness Carefully

Both the offering reform proposal and, indirectly, the ELI/SELI framework continue to depend heavily on current and timely Exchange Act reporting. A company that looks like a beneficiary on paper may discover that filing delays or a problematic reporting history undermine eligibility. Companies should therefore review the past 12 months of Exchange Act reporting in detail.

Revisit Capital-Markets Planning

Companies that historically assumed Form S-3 or ATM access was unavailable, or that were forced toward private financings or registered direct structures, should revisit their financing playbook. A company that becomes S-3 eligible, or an exchange-listed company that becomes an ELI or SELI, may want to prepare for:

• Shelf registration readiness.
• ATM documentation and bank outreach.
• Takedown procedures and disclosure committee protocols.
• For affected funds, whether it would become newly eligible for Short-Form N-2 or automatic shelf registration under the ELI/SELI framework.

Consider Whether to Maintain Some Practices Voluntarily

Some companies that would move into NAF status may conclude that even if the rules permit them to scale back disclosure or stop obtaining ICFR auditor attestation, market expectations still justify keeping some current practices. That may be especially true where institutional investor expectations, lender expectations, or governance signaling concerns remain strong. The rule changes may permit less; they do not always mean the market will reward less.

Watch the Interaction Among the Proposals

These SEC initiatives are best understood as cumulative. A company that becomes newly S-3 eligible, newly ELI/SELI eligible, and newly NAF at the same time could see a dramatic change in both its capital-raising flexibility and ongoing compliance burden. Add the possibility of future semiannual reporting, and the operating model of being public could look meaningfully different for smaller and midsized issuers.

What’s Next?

The SEC’s two May 19 proposals represent a coordinated effort to make public company status less burdensome and public capital formation more efficient. One proposal would make it much easier for more issuers to use the SEC’s most powerful registered offering tools: Form S-3, shelf registration, ATM programs, automatic shelves and broader communications flexibility. The other would simplify the filer-status framework, move more issuers into scaled-disclosure treatment, and reduce high-cost obligations such as SOX 404(b) auditor attestation for all but the largest public companies. Comments on both proposals are due July 20.

Executives within organizations should not wait for final rules, but begin mapping where the company would land under the proposed framework and how that would affect disclosure strategy, internal controls, financing options and board-level planning. Companies and advisers that prepare early may be best positioned to take advantage of the SEC’s attempt to ease the compliance burdens of a public company.