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SEC Guidance Expanding Exclusions for Non-GAAP Information

The Securities and Exchange Commission’s Division of Corporation Finance issued two new Compliance and Disclosure Interpretations (C&DI), expanding its previously issued guidance related to the exemption from Item 10(e)(5) under Regulation S-K and Regulation G for non-GAAP financial information provided to a financial advisor in forecasts for business combination transactions. The previously issued guidance was discussed in the November 3, 2017 edition of the Corporate & Financial Weekly Digest.

As previously addressed, C&DI 101.01 states that financial measures provided to a financial advisor in connection with a business combination transaction would be excluded from the definition of non-GAAP financial measures and thus, not subject to Item 10(e) of Regulation S-K or Regulation G, if and to the extent that the following conditions are satisfied:

  1. The financial measures are included in forecasts to a financial advisor for the purpose of rendering of an opinion that is materially related to the business combination transaction; and
  2. The forecasts are being disclosed to comply with Item 1015 of Regulation M-A or requirements under state or foreign law with respect to the disclosure of a financial advisor’s analyses or substantive work.

New C&DI 101.02 clarifies that a company may rely on the guidance in 101.01 to the extent the same forecasts are provided to the company’s board of directors or a board committee. New C&DI 101.03 further provides that, if a company exchanges forecasts with bidders, and disclosure of such forecasts is required under the federal securities laws, the financial measures included in those forecasts would be similarly excluded from the definition of non-GAAP financial measures and not subject to Item 10(e) of Regulation S-K and Regulation G.

The full text of the C&DIs is available here.

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About this Author

Mark D. Wood, corporate securities lawyer Katten Muchin Chicago Law firm
Partner

Mark D. Wood is head of Katten's Securities practice and concentrates in corporate and securities law. Mark represents public companies, issuers and investment banks in initial public offerings (IPOs) and other public offerings, private investment in public equity (PIPE) transactions, debt securities and other securities matters.

Mark also represents clients in complex corporate transactions, including tender offers, mergers, acquisitions, dispositions, going-private transactions, private equity investments, joint ventures and...

312-902-5493
Mark Reyes Securities Lawyer Katten Muchin law firm Chicago office
Partner

Mark J. Reyes concentrates his practice in corporate and securities matters, including representing issuers and investors in public offerings and private placements of equity and debt securities and advising clients in complex corporate transactions such as mergers, acquisitions, private investments in public equity (PIPEs), private equity investments and joint ventures. He also counsels public companies on securities law compliance, disclosures and corporate governance matters.

Shown below is a selection of Mark’s engagements.

  • Representation of hospitality company in connection with its initial public offering and listing on NYSE, as well as ongoing counseling with respect to compliance with securities laws and NYSE rules, disclosure and corporate governance matters.
  • Representation of NASDAQ-listed public company in the banking industry in connection with strategic transactions, capital raising transactions, compliance with securities laws and NYSE rules, disclosure and corporate governance matters, including strategic acquisitions, notes offering and at-the-market offering.
  • Representation of clean tech manufacturer for industrial equipment in connection with alternative public offering and listing on NASDAQ, as well as ongoing counseling with respect to compliance with securities laws and NASDAQ rules, disclosure and corporate governance matters.
  • Representation of NASDAQ-listed issuer in connection with selling stockholder block trades.
  • Representation of NYSE-listed industrial manufacturer with respect to compliance with securities laws and NYSE rules, disclosure and corporate governance matters.
  • Representation of NASDAQ-listed medical device company with respect to compliance with securities laws and NASDAQ rules, disclosure and corporate governance matters.
312-902-5612
Shannon Traylor, Corporate Attorney, Katten Law Firm
Associate

Shannon Traylor concentrates her practice in general corporate matters.

While attending law school, Shannon was a member of the Virginia Journal of International Law and its submission review board. Prior to law school, Shannon worked in the Washington, DC area for a nonprofit devoted to nuclear nonproliferation.

202-625-3798