Nareit Alert: SEC Proposes to amend Internal Control Attestation Requirements for Smaller Companies

SEC Proposes to amend Internal Control Attestation Requirements for Smaller Companies

On May 9, the Securities and Exchange Commission voted to propose amendments (the proposal) to the accelerated filer and large accelerated filer definitions. Under the proposal smaller reporting companies, including REITs, with less than $100 million in annual revenues and less than $700 million in public float in the most recent fiscal year for which audited financial statements are available would not be subject to any accelerated filing requirements, nor be subject to the internal control attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

Nareit’s initial estimate is that this change would apply to approximately 20 registrants operating as REITs.

Additionally, the proposal would:

  • Increase the transition thresholds for accelerated and large accelerated filers becoming a non-accelerated filer from $50 million to $60 million and for exiting large accelerated filer status from $500 million to $560 million; and,
  • Add a revenue test to the transition thresholds for exiting both accelerated and large accelerated filer status.

The proposal would not change key protections from the Sarbanes-Oxley Act of 2002, such as independent audit committee requirements, CEO and CFO certifications of financial reports, or the requirement that companies continue to establish, maintain, and assess the effectiveness of their internal control over financial reporting.

If you are interested in participating in a Nareit task force that will evaluate the proposed amendments and assess whether Nareit should comment, please contact Christopher Drula (cdrula@nareit.com) by May 21. Comment letters are due to the SEC 60 days after the proposal is published in the Federal Register.

Contact

Christopher Drula (cdrula@nareit.com), Victoria Rostow (vrostow@nareit.com), or George Yungmann (gyungmann@nareit.com).