SEC Rulemaking Activity of Interest to Retailers
Time 3 Minute Read

As detailed in our recent client alert, the Securities and Exchange Commission (“SEC”) recently proposed or adopted several rules of interest to retailers, particularly those that are publicly traded. They concern (1) final rules modernizing the definition of “smaller reporting company” (“SRC”), (2) final rules implementing the use of Inline eXtensible Business Reporting Language (“XBRL”) and (3) proposed rules amending the SEC’s whistleblower program.

Under the SEC’s scaled disclosure program, SRCs qualify to use somewhat relaxed reporting standards. The new SRC definition enables a company with a public float of less than $250 million to qualify as an SRC. A company with no public float or with a public float of less than $700 million will qualify as an SRC if it had annual revenues of less than $100 million during its most recently completed fiscal year. The rules will become effective September 10, 2018.

The SEC will now require the use of Inline XBRL for operating company financial statement information. Inline XBRL involves embedding XBRL data directly into the filing so that the disclosure document is both human-readable and machine-readable. Inline XBRL (as opposed to the XBRL used currently) promises a number of benefits and efficiencies, including increased accuracy and transparency of the XBRL data embedded into public filings. The amendments are part of the SEC’s initiative to modernize and improve the quality and accessibility of XBRL data while decreasing the cost of submitting financial information to the SEC. The rules take effect in stages, beginning with financial periods ending on or after June 15, 2019, for large accelerated filers.

The proposed amendments to the SEC’s whistleblower rules cover a number of different areas, though the bulk of the amendments would provide the SEC additional tools in making award determinations. For example, the SEC’s whistleblower rules do not address whether the SEC may pay a related-action award when an eligible whistleblower voluntarily provides original information that leads to a deferred prosecution agreement (“DPA”) or non-prosecution agreement (“NPA”) entered into by the U.S. Department of Justice or a state attorney general in a criminal proceeding. Under the proposed amendments, the SEC would be able to make award payments to whistleblowers based on money collected as a result of such DPAs and NPAs, as well as under settlement agreements entered into by the SEC outside of the context of a judicial or administrative proceeding to address violations of the securities laws.

The proposed amendments would provide additional considerations for small and exceedingly large awards. For awards less than $2 million, the proposed amendments would authorize the SEC in its discretion to adjust the award percentage upward under certain circumstances (subject to the 30 percent statutory maximum) to an amount up to $2 million. For awards of at least $100 million, the proposed amendments would authorize the SEC in its discretion to adjust the award percentage so that it would yield a payout (subject to the 10 percent statutory minimum) that does not exceed an amount that is reasonably necessary to reward the whistleblower and to incentivize other similarly situated whistleblowers. However, in no event would the award be adjusted below $30 million.

The proposed amendments would eliminate the potential for double recovery by preventing a whistleblower from receiving multiple recoveries for the same information from different government whistleblower programs.

Public comments on the proposed amendments are due to the SEC by September 18, 2018.

  • Partner

    Scott brings in-depth knowledge of SEC policies, procedures and enforcement philosophy to each representation. Scott regularly advises clients across a broad sector of the economy facing sensitive reporting, compliance and ...


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