Making IPOs Viable Again: SEC Proposal Aims to Level the Playing Field for Smaller Company IPOs

This week, at the annual “State of the Industry” briefing, the Securities Industry and Financial Markets Association (“SIFMA”) publicly signaled its support for a comprehensive reform proposal by the SEC that could significantly ease the regulatory burden on smaller companies seeking to go public.

Under the plan introduced by SEC Chair Paul Atkins, small-cap and emerging growth companies would benefit from lighter reporting requirements, a shift from the current “one-size-fits-all” disclosures that apply equally to firms with $250 million in market cap and those with valuations 100 times larger. The proposal would extend the “on-ramp” period for compliance (currently around one year) to at least two years, offering a longer runway for small companies to adapt.

For many smaller or mid-sized companies, especially those in growth industries, this could be a game changer. The reduced regulatory overhead may make public listing a more realistic and attractive strategic option.

At SIFMA’s briefing, CEO Kenneth Bentsen described the reforms as a long-overdue modernization of disclosure thresholds originally established more than two decades ago. Meanwhile, SIFMA’s acting chair at the event observed that the burdens and costs associated with going public, and staying public, have in many cases made private markets more appealing than the public equity market.

Why It Matters for Businesses (and Their Legal Advisors)

Lower Barriers, More IPO Candidates

Smaller firms, especially emerging growth companies, often find the cost and complexity of compliance to be a major deterrent to going public. Under more flexible reporting regimes, firms might reconsider the IPO path over alternative options such as private funding or staying private indefinitely.

Potential for a Renewed Public-Market Renaissance

In recent years, the number of publicly listed companies in the U.S. has declined markedly. According to SIFMA, the current public-company count of roughly 4,300 is far lower than the over 7,000 listed companies in the 1990s. By making going public more accessible, the SEC aims to revitalize the public markets — a move that could enhance liquidity, drive competition, and broader participation in equity ownership.

Strategic Opportunity for Corporate Counsel

For law firms advising growing firms — particularly those considering an IPO in the next few years — the proposed reforms present a unique window of opportunity. Counsel should begin evaluating which clients might benefit from the relaxed requirements, counsel them on the revised timeline, and help structure their financials and corporate governance.

Advisors may also need to prepare for a possible increase in IPO activity: offering representation services, helping with disclosure strategies, drafting lighter but still compliant registration statements, and facilitating compliance with any new phased-in reporting obligations.

What’s Changing — And What to Watch

• Disclosure thresholds will scale with company size. The “one-size-fits-all” disclosure requirement will be replaced with a more graduated regime. Under the current system, even companies with a relatively modest size (e.g., $250 million market cap) must file the same disclosures as behemoths hundreds of times larger. The SEC is proposing to adjust that.
• Longer “on-ramp” for compliance. Instead of forcing smaller companies to comply fully soon after going public, the new plan contemplates a longer transition period (at least two years) to spread compliance burden across time.
• Possible reduction in periodic reporting obligations. There is discussion around shifting from quarterly reporting to semiannual reporting for some companies — which could reduce overhead while preserving material transparency.
• Lower ongoing cost and administrative burdens. By decreasing the regulatory load, going public becomes more cost-effective and less administratively taxing — a particularly meaningful factor for capital-constrained growth companies.

What Remains a Risk — And Where Legal Counsel Should Stay Vigilant

While these reforms present considerable advantages, they are not without risk — and companies (and their counsel) must navigate carefully.

• Market Perception & Investor Relations: Lighter disclosure may save costs, but reduced transparency could lead to increased scrutiny or skepticism from institutional investors, analysts, or the broader market. Companies and their counsel will need to strike an appropriate balance between compliance efficiency and investor confidence.
• Regulatory Uncertainty During Transition: Until final rules are adopted, there may be significant uncertainty — both as to the final form of the reforms, and as to how regulators will enforce them. Legal advisors should monitor developments closely and advise clients conservatively.
• Governance and Compliance Infrastructure: Even under an “on-ramp,” companies will still need solid compliance infrastructure — particularly if they plan to scale quickly post-IPO. Counsel will need to help clients assess readiness, draft policies, and ensure that governance standards are robust.

Final Thoughts

The public markets have long been under pressure as capital flows shifted increasingly toward private equity, venture capital, and alternative funding vehicles. If adopted, the SEC’s proposed reforms, backed by SIFMA, could help reverse that trend by lowering legal and regulatory barriers.

For smaller companies, this could reopen the door to public listing. For legal advisors, it opens a wave of strategic opportunities, and responsibilities. At Torres & Zheng, we stand ready to guide clients through this new era of IPO-friendly regulation, helping them seize the moment with sound legal strategy, smart compliance planning, and a clear path toward successful public listing.

Contact Person: Nick L. Torres, Esq. and Zhiqi Zheng, Esq.