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A New Chapter for Non-GAAP Financial Measures
June 28, 2016 , Covington Alert
The SEC’s Division of Corporation Finance (the “Division”) recently issued updated interpretive guidance on the use of non-GAAP financial measures. This guidance reflects an increasingly assertive position taken by the SEC in recent months regarding public companies’ use of numerical measures of performance, financial position or cash flows that are not calculated in accordance with generally accepted accounting principles (“GAAP”). This renewed focus follows years of use of non-GAAP financial measures by many issuers and recent analyst research and press reports that have raised questions about the discrepancies between such measures and financial performance metrics calculated in accordance with GAAP.
May 2, 2017, Covington Alert
On April 19, 2017, the House Financial Services Committee (the “Committee”) released a new “discussion draft” of the Financial CHOICE Act (“CHOICE Act 2.0”), its comprehensive regulatory reform bill aimed at revising or repealing many features of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The Committee released the first version of the bill in June 2016.
Prospects for enactment of the CHOICE Act 2.0 are dim, at best. In its omnibus form, the bill is not expected to have substantial, if any, bipartisan support, and in the Senate, the legislative filibuster probably dooms its fate. However, it is possible that discrete pieces of the bill could have bipartisan appeal and thus might be able to be passed separately, and perhaps in short order.
This client alert summarizes some of the more noteworthy provisions that would affect the securities laws and regulation of capital markets. The bill also includes significant changes to the regulation of banks and other financial institutions, which we described in our client alert published on April 24, 2017.
April 11, 2017, Covington Alert
The U.S. Securities and Exchange Commission (“SEC”) has adopted amendments to its rules and forms that will require companies filing registration statements and reports subject to the exhibit requirements of Item 601 of Regulation S-K to include an active hyperlink to each exhibit listed in the exhibit index, whether or not the exhibit is incorporated by reference. To facilitate the use of hyperlinks, subject to a small exception, the amendments also require companies to file such registration statements and reports on the SEC’s electronic filing system, EDGAR, in HyperText Markup Language (“HTML”) format.
The SEC also has proposed rule amendments that would require the use of the Inline eXtensible Business Reporting Language (“XBRL”) format for public companies and mutual funds that submit financial statement information and risk/return summaries using XBRL. The proposed amendments would also eliminate the current requirement for such filers to post XBRL data files on their websites.
December 1, 2016, Covington Alert
The Securities and Exchange Commission (the “SEC”) recently adopted rules to update and enhance registration exemptions for intrastate and regional securities offerings. The final rules amend Rule 147, a safe harbor for exempt intrastate offerings under the Securities Act of 1933 (the “Securities Act”). In addition, the final rules establish a new offering exemption, Rule 147A under the Securities Act, which expands flexibility for intrastate offerings by (i) allowing issuers to make communications that would constitute offers through media that cannot practicably be limited to a single state and (ii) permitting use of the rule by companies that are incorporated or organized in a state other than the state where the securities are being sold. Aside from these two key differences, discussed in more detail below, amended Rule 147 and new Rule 147A are substantially similar.