Accelerated filer

What Is Accelerated Filer?

An accelerated filer is a classification given by the U.S. Securities and Exchange Commission (SEC) to certain publicly traded companies based on the aggregate market value of their common equity held by non-affiliates, known as their public float. This classification, part of the broader domain of financial reporting and securities regulation, dictates specific requirements for the timeliness of filing periodic reports with the SEC. Companies categorized as an accelerated filer face shorter deadlines for their annual reports and quarterly reports compared to non-accelerated filers. Crucially, this status also triggers the requirement for an independent auditor's attestation of management's assessment of internal control over financial reporting under the Sarbanes-Oxley Act (SOX) Section 404(b).

History and Origin

The concept of an accelerated filer was established by the SEC under the Securities Exchange Act of 1934, specifically through Rule 12b-2, to streamline and expedite the disclosure of important financial information from larger, more established public companies. The classification was part of the SEC's efforts to ensure timely access to corporate financial statements for investors and the market.

A significant development impacting the accelerated filer definition occurred with the enactment of the Sarbanes-Oxley Act of 2002, particularly Section 404(b), which mandated an external auditor attestation report on the effectiveness of a company's internal controls over financial reporting. This requirement applied to accelerated and large accelerated filers, imposing substantial compliance costs.

In a move to reduce burdens for smaller issuers, the SEC adopted amendments to the accelerated filer and large accelerated filer definitions on March 12, 2020. These amendments primarily aimed to exclude certain low-revenue smaller reporting companies (SRCs) from the accelerated filer category, thereby exempting them from the SOX 404(b) auditor attestation requirement. The amendments became effective on April 27, 2020, and applied to annual reports due on or after that date.¹⁶

Key Takeaways

• An accelerated filer is an SEC classification that dictates filing deadlines for public companies.
• This status is primarily determined by a company's public float and recent annual reporting history.
• Accelerated filers are subject to shorter deadlines for submitting annual and quarterly reports.
• A key consequence of accelerated filer status is the requirement for an independent auditor's attestation on internal control over financial reporting under SOX Section 404(b).
• Recent SEC amendments in 2020 introduced a revenue-based exclusion, particularly benefiting certain smaller reporting companies by exempting them from this attestation.

Interpreting the Accelerated Filer

The designation of an accelerated filer status is not merely administrative; it carries significant implications for a public company's disclosure obligations and operational overhead. Investors and market participants often interpret this status as an indication of a company's size, maturity, and its level of regulatory scrutiny. Companies that qualify as an accelerated filer are generally expected to have more robust internal systems to produce and file financial information rapidly.

For companies, understanding their accelerated filer status is critical for managing their reporting calendar and budgeting for audit expenses. It affects the timing of SEC filings like Form 10-K (annual report) and Form 10-Q (quarterly report). Furthermore, the requirement for an auditor's attestation of internal controls underscores the expectation of high-quality financial reporting and accountability from these companies.

Hypothetical Example

Consider a hypothetical company, "InnovateTech Inc.," that recently went public through an initial public offering (IPO). As of the last business day of its most recently completed second fiscal quarter, InnovateTech's public float is $150 million. It has been subject to the reporting requirements of the Securities Exchange Act of 1934 for 18 months and has filed its first annual report.

Based on these criteria—a public float between $75 million and $700 million, being subject to Exchange Act reporting for at least 12 months, and having filed at least one annual report—InnovateTech Inc. would be classified as an accelerated filer. This classification means that InnovateTech must file its Form 10-K within 75 days after its fiscal year-end and its Form 10-Q within 40 days after its fiscal quarter-end. Additionally, its independent auditor must attest to management's assessment of the company's internal control over financial reporting, a key compliance requirement under its accelerated filer status.

Practical Applications

Accelerated filer status has several practical applications across various facets of finance and business:

• Corporate Reporting Deadlines: The most direct impact is on the deadlines for submitting periodic reports to the SEC. Accelerated filers must submit their Form 10-K within 75 days after their fiscal year-end and their Form 10-Q within 40 days after their fiscal quarter-end. This is shorter than the 90-day and 45-day deadlines, respectively, for non-accelerated filers.
• ¹⁵ Auditor Attestation Requirements: Companies classified as an accelerated filer, unless they qualify for a specific exemption as a low-revenue smaller reporting company, are required to obtain an independent external auditor's attestation report on the effectiveness of their internal control over financial reporting, as per SOX Section 404(b). Thi¹⁴s requirement aims to enhance the reliability of financial information.
• Regulatory Scrutiny: The classification places companies under a higher level of regulatory scrutiny regarding their financial reporting practices. This encourages robust internal controls and accurate data.
• Investor Perception: For many investors, a company's accelerated filer status can signal its size and relative maturity in the public markets, distinguishing it from smaller or newer companies that may have fewer reporting obligations.

The SEC's 2020 amendments to the accelerated filer and large accelerated filer definitions adjusted thresholds to alleviate some burdens, particularly for smaller public companies. These changes exempted certain business development companies and SRCs with annual revenue of less than $100 million from the SOX 404(b) auditor attestation requirement, even if their public float would otherwise classify them as an accelerated filer. Thi¹³s adjustment was intended to promote capital formation by reducing compliance costs for these specific entities. The official SEC Small Entity Compliance Guide provides further details on these amendments.

##¹² Limitations and Criticisms

While the accelerated filer classification aims to ensure timely and robust financial reporting, it has faced criticisms, primarily concerning the compliance burden, particularly before the 2020 amendments.

One significant limitation cited by companies, especially smaller ones that previously fell into the accelerated filer category, was the cost associated with obtaining the SOX 404(b) auditor attestation. This external audit requirement can be expensive, and some argued it disproportionately affected companies with lower revenues. The SEC acknowledged these concerns and, in 2020, amended the definitions to provide relief to low-revenue smaller reporting companies, exempting them from this specific attestation.

De¹¹spite the relief provided by the 2020 amendments, some stakeholders, including institutional investors, expressed concerns. A report by FTI Strategic Communications indicated that many investors did not support the updated rule, with a significant majority expressing concern about the lack of auditor attestation for newly exempted companies. Thi¹⁰s suggests a potential tension between reducing corporate compliance costs and maintaining investor confidence in the reliability of financial statements without a full auditor attestation. Some critics argue that the absence of this attestation could potentially reduce transparency and increase investment risk for affected companies, though the SEC has stated that other existing internal control requirements and market dynamics would mitigate these effects.

##⁹ Accelerated Filer vs. Large Accelerated Filer

The terms accelerated filer and large accelerated filer are both classifications used by the SEC under Rule 12b-2 of the Securities Exchange Act of 1934 to categorize public companies based on their public float and reporting history. The key distinction lies in the thresholds for public float and the corresponding filing deadlines.

An accelerated filer generally has a public float of $75 million or more but less than $700 million, has been subject to Exchange Act reporting requirements for at least 12 months, and has filed at least one annual report. They must file their annual reports within 75 days and quarterly reports within 40 days.

A large accelerated filer, conversely, is a company with a public float of $700 million or more, meeting the same reporting history criteria. The⁸se companies face even shorter filing deadlines: 60 days for annual reports and 40 days for quarterly reports. Ess⁷entially, a large accelerated filer is the largest category of publicly traded companies in terms of public float, triggering the most stringent reporting deadlines. Both categories are typically subject to the SOX 404(b) auditor attestation requirement, though the 2020 amendments introduced exemptions for certain low-revenue smaller reporting companies across both classifications.

##⁶ FAQs

How does a company become an accelerated filer?

A company generally becomes an accelerated filer if, as of the last business day of its most recently completed second fiscal quarter, it has a market capitalization (public float) of $75 million or more but less than $700 million. Additionally, it must have been subject to the reporting requirements of the Securities Exchange Act of 1934 for at least 12 calendar months and have filed at least one annual report. Exclusions apply for certain smaller reporting companies with low revenue.

##⁵# What are the key differences between an accelerated filer and a non-accelerated filer?

The main differences relate to reporting deadlines and the internal control over financial reporting (ICFR) auditor attestation requirement. An accelerated filer faces shorter deadlines for submitting its annual and quarterly reports and, unless exempted, must obtain an independent auditor's attestation on its ICFR under SOX Section 404(b). A non-accelerated filer has more extended deadlines and is exempt from this specific auditor attestation.

##⁴# Can a company change its accelerated filer status?

Yes, a company's filer status can change based on changes in its public float or, following the 2020 amendments, its revenue. For instance, an accelerated filer may become a non-accelerated filer if its public float drops below $60 million, or if it qualifies as a smaller reporting company under the revenue test (less than $100 million in annual revenue). Thi³s determination is typically made at the end of the fiscal year based on the public float as of the last business day of the most recently completed second fiscal quarter.

##²# What are the main benefits of being an accelerated filer?

While it imposes stricter requirements, being an accelerated filer generally indicates a company's larger size and greater presence in the public market. The heightened reporting standards and auditor attestation requirements can enhance investor confidence in the company's financial transparency and the reliability of its financial data.

Does accelerated filer status affect a company's stock price?

Directly, the status itself does not typically cause a stock price movement. However, the underlying factors that determine accelerated filer status—such as a large public float and established reporting history—are generally associated with more mature, larger companies that may be perceived as less risky by investors. Changes in filer status, especially exiting accelerated filer status, could be interpreted by some investors as a negative signal regarding the company's size or financial health, particularly if it means a reduction in external audit oversight.¹