The SEC proposes more rules changes to encourage IPOs

The Securities and Exchange Commission is out with a fresh set of proposed regulatory rollbacks meant to encourage IPOs. The proposals would, among other things, effectively reduce the number of companies required to obtain an independent external auditor’s attestation of their internal financial-reporting controls—a requirement introduced in Sarbanes-Oxley and commonly called SOX 404(b).

The rule changes “reflect a clear directional shift” in the SEC’s enforcement philosophy under Chair Paul Atkins, Kaela Dahan, counsel in law firm Reed Smith’s regulatory and investigations group, wrote in an email to CFO Brew.

But they do not diminish the need for organizations to have strong internal controls and processes, according to other experts we spoke with.

“I think now CFOs are going to have to [say], ‘Does this really matter? Is this really an inherent part of your organization, or was this just more of a compliance function?’” Steve Soter, VP and industry principal at Workiva, told CFO Brew. “I think that’s where the rubber is going to hit the road for CFOs, is being able to appropriately prioritize [internal controls] without the teeth of that auditor attestation.”

What’s being proposed? The SEC’s proposed rule changes, announced last Tuesday, “serve as the foundation for my agenda to make IPOs great again,” Atkins said in a statement.

The reforms would raise the threshold for companies to be considered large accelerated filers from $700 million to $2 billion in public float. The threshold has to be met two years in a row, and companies also get at least five years before they become a large accelerated filer. Being a non-accelerated filer has its perks, as a business will not be required to obtain that auditor’s attestation on internal controls over financial reporting, according to an SEC fact sheet.

The rules changes would also introduce accommodations for all non-accelerated filers that the SEC previously reserved for smaller reporting and emerging growth companies. They include scaled requirements for executive compensation disclosure and fewer past audited financial statements.

If implemented, the changes would loosen disclosure regulations for 81% of all public companies, the SEC noted. Before that, there will be a 60-day public comment period.

“These proposals materially change the IPO conversation because they reduce the sense that becoming a public company automatically means stepping into a high-risk regulatory environment,” Dahan said.

What it means for CFOs. Many organizations are still digesting the SEC’s announcement, Soter said. But those he has spoken with have some initial thoughts.

The rule modifications will trigger conversations among management and board members, he said, “but the sort of quiet admission has been, ‘I don’t know if this is really going to change much.’”

Soter pointed to a Workiva survey of 400-plus senior executives that found 86% of CFOs believe that lighter regulations don’t eliminate the need for accurate data. Nearly nine in 10 CFO respondents said their organizations already have controls that exceed what’s mandated by regulations.

Even so, the changes could benefit smaller or newly public companies with a longer reporting runway and “more time to mature” their controls and processes, Soter added.

The bigger picture. The IPO proposals are just the latest step in Atkins’s quest to remake the SEC, according to Dahan, who called out other recent developments such as the rescission of the so-called Gag Rule on May 18 and a batch of enforcement updates in February. The proof of the enforcement pudding is in the eating, or perhaps in the abstention from eating: SEC enforcement actions fell 30% YoY in fiscal 2025.

The SEC remains focused on “traditional enforcement priorities,” including fraud and market manipulation, Dahan said. But the agency no longer has an “appetite for expansive or novel enforcement theories” such as “aggressive dealer-definition theories and certain non-fraud crypto actions.”