March 24, 2005
Definition of Accelerated Filers and its effect on SOX Compliance for Nonaccelerated filers.
Currently, the company I am controller of is a non-accelerated filer June 30, 2004 public float 75m. Recently the SEC has postponed the SOX Compliance for Nonaccelerated filers to December 2006.
Per the definition of Accelerated Filers, MYCO COULD become an accelerated filer if, on June 30, 2005, the market price of the stock exceeds approximately 10/share, thereby causing the public float to exceed 75m. If that occurs, then it appears my company must comply with SOX requirements.
This causes a dilema. As there is significant work that must be done, and at varying costs to my company, to not know our status for three more months, and in effect, halfway through the year, appears to be quite a concern.
The costs we expect to incur, to meet this deadline of Dec 31, 2005, are substantially greater since we must meet certain milestones by June 30, 2005 in our project to allow for an effective project to be successful. These costs include having to hire outside consultants as additional resources to supplement the additional workload placed on my company.
On the other hand, if, on June 30th, 2005, it is determined we are a non-accelerated filer, these additional external costs could have been avoided.
Also, the definition of accelerated filers appears to have been adopted originally to determine the accelerated filing of 10Ks and 10Qs, not SOX. Per your regulations, it would appear that even if my company became an accelerated filer in 2005, we would have a phase in period over 3 filing years to accommodate the quicker filings, with there being no effect on the 2005 10K or 2006 10Qs.
My question to you is, given the above scenario, and knowing there must be several other current non-accelerated filers who may become accelerated filers in 2005 becasue of this clause, has the SEC considered the impact in this for these companies on the status bubble?
Is the SEC comfortable that these bubble companies must wait approximately 4 months in a state of limbo not knowing their ultimate future status?
Has the SEC considered different criteria to determine possible change in status for SOX compliance since everyone must comply by 2006?
Please address this in your round table discussions as I plan on attending.
Sincerely
TJT