Letter to the SEC on Registered Offering Reform
July 27, 2026
July 27, 2026
Vanessa A. Countryman, Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
Submitted online at SEC.gov | Submit Comments on S7-2026-17
RE: Proposed Rule on Registered Offering Reform
Release Nos. 33-11418; 34-105513; IC-36160; File No. S7-2026-17
RIN 3235-AN41
Dear Mr./Ms. Countryman:
The Virginia Society of CPAs (VSCPA) Accounting & Auditing Advisory Committee has reviewed the Exposure Draft (ED) — Proposed Rule on Registered Offering Reform, (Release No. 33-11418) issued by the Securities and Exchange Commission. The VSCPA is the leading professional association in Virginia dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. The VSCPA membership consists of nearly 11,000 individual members who actively work in public accounting, private industry, government, and education.
We recognize the Commission's objective of modernizing the registered offering framework and facilitating capital formation through the Commission’s proposed rule, Registered Offering Reform (Release No. 33-11418). While we support efforts to improve market efficiency, we believe such efforts should continue to strike an appropriate balance between reducing regulatory burden and preserving the safeguards that promote transparent financial reporting, robust internal controls, and investor confidence. Our comments focus on the proposal's technical implications for financial reporting integrity, independent audit verification, and internal control frameworks.
Overall, we believe the Commission should carefully consider whether the combined effect of eliminating the 12-month seasoning period and removing the $75 million public float threshold for Form S-3 eligibility appropriately balances capital formation with investor protection. While we support efforts to modernize the offering process, we believe these and other existing eligibility criteria continue to serve an important role in promoting rigorous standards of financial reporting, effective internal controls, independent audit verification, and high-quality financial disclosures. In our view, current filing thresholds serve as essential safeguards to help mitigate the detection risk that a company’s financial reporting mechanisms and internal controls may not yet have reached a sufficient level of maturity to adequately address the inherent risk in accelerated public offerings. Accordingly, the Commission should carefully evaluate whether the proposed changes would preserve the investor protections currently afforded by these eligibility requirements. We also encourage the Commission to consider whether additional safeguards or implementation guidance could achieve the proposal's capital formation objectives while preserving investor confidence. Our specific comments are discussed below.
1. Risks to Internal Control Evaluations
Eliminating the 12-month seasoning period for Form S-3 shelf eligibility may permit newly public issuers to execute accelerated public offerings immediately post-IPO. The current one-year waiting period provides a critical operational buffer, allowing a full annual reporting cycle for a company's Internal Controls over Financial Reporting to demonstrate sufficiently mature control processes under public market oversight. This may increase the risk of undetected material misstatements.
2. Financial Reporting Strains from Accelerated Dilution
In some cases, eliminating the $75 million public float threshold may remove an important safeguard for financial reporting volatility for smaller issuers. When micro-cap companies experience sudden liquidity constraints, accelerated shelf take-downs may be used to cover recurring operational cash-flow shortfalls. From an accounting perspective, such rapid capital shifts may increase complexity in financial reporting and investor analysis, particularly when significant changes occur between periodic reporting dates. This may make it more difficult for investors to distinguish between improvements in liquidity and improvements in underlying operating performance and may require careful consideration of related financial reporting and disclosure implications by management.
3. Compression of Audit Verification Windows and Risk of Stale Disclosures.
While Section 11 and 12 legal liabilities remain unchanged, the reality of compressed, "overnight" shelf take-downs may leave independent auditors and underwriters with more limited time to execute substantive due diligence. As a result, they may need to rely more heavily on previously filed information rather than verifying more recent transactions and developments. Consequently, financial disclosures may become stale prior to the launch of an offering, increasing the risk that significant or material subsequent events may not be made known to investors before capital is committed. This structural limitation may reduce the timeliness and completeness of information available to investors.
4. Technical Misattribution of Systemic Failures
With the foregoing in mind, the combination of financial reporting and internal control risks associated with compressed offering timelines may contribute to an expanded audit expectation gap. When an unseasoned company experiences a sudden financial collapse following an accelerated offering, public scrutiny may shift to the audited financial statements even when the underlying issues relate to business decisions, internal control deficiencies, or the regulatory framework governing the offering process. Consequently, the role of independent auditors and the purpose of the audit may be misunderstood, potentially affecting public confidence in financial reporting. The Committee encourages the Commission to consider whether additional safeguards or disclosure requirements are appropriate to help preserve investor confidence while achieving the proposal's capital formation objectives.
The VSCPA appreciates the opportunity to respond to this ED. Please direct any questions or concerns to VSCPA Vice President, Advocacy & Pipeline Emily Walker, CAE, at ewalker@vscpa.com or (804) 612- 9428.
Sincerely,
Elissa Obillo, CPA
Chair 2026-2027
VSCPA Accounting & Auditing Advisory Committee
VSCPA Accounting & Auditing Advisory Committee 2026-2027
Elisa Obillo, CPA — Chair
Domenic Savini, CPA — Vice Chair
Scott Cohen, CPA
Jonathan Head, CPA
Clarissa Hoffman, CPA
Joshua Keene, CPA
Daniel Martin, CPA
John McIntosh, CPA
Kendra Morgan, CPA
Brook Peterson, CPA
Michael Phillips, CPA
Amy Stokes, CPA
Clara Tang, CPA
Charles Valadez, CPA
Anna Wagner, CPA
Patrick Wunderlich, CPA
Natalya Yashina, CPA