SEC’s disclosure effectiveness initiative reshapes MD&A disclosure requirements

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Richard J. Parrino
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Financial Information ◽  
Content Type ◽  
Market Participants ◽  
Financial Condition ◽  
Disclosure Requirements ◽  
Depth Analysis ◽  
The Us ◽  
Financial Disclosures

Purpose This article examines rule amendments issued by the US Securities and Exchange Commission in November 2020, as part of the SEC’s ongoing “disclosure effectiveness initiative”, that revise in significant respects the requirements for financial disclosures presented in SEC filings as Management’s Discussion and Analysis of Financial Condition and Results of Operations. Design/methodology/approach This article provides an in-depth analysis of the rule amendments in the context of contrasting perspectives expressed by the SEC, individual SEC Commissioners who dissented from adoption of the amendments, and market participants regarding the merits of the SEC’s movement away from prescriptive disclosure requirements towards a more principles-based approach to disclosure. Findings Although the SEC’s rules have long reflected a mix of principles-based and prescriptive disclosure elements, the principles-based emphasis in this latest stage of the SEC’s disclosure modernization project accords the managements of filing companies greater latitude to determine whether financial information is material to investors and how such information should be presented. Originality/value This article provides expert guidance on a major new SEC disclosure development from an experienced securities lawyer.

Bringing order to non-GAAP financial measures: SEC sues to enforce “equal-or-greater-prominence” requirement

2019 ◽  
Vol 20 (4) ◽  
pp. 51-57
Author(s):  
Richard J. Parrino
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Financial Measures ◽  
Generally Accepted Accounting Principles ◽  
Enforcement Action ◽  
Accounting Principles ◽  
Depth Analysis ◽  
The Us ◽  
Earnings Releases

Purpose This article examines the first action by the US Securities and Exchange Commission to enforce the “equal-or-greater-prominence” requirement of its rules governing the presentation by SEC-reporting companies, in their SEC filings and earnings releases, of financial measures not prepared in accordance with generally accepted accounting principles (GAAP). Design/methodology/approach This article provides an in-depth analysis of the equal-or-greater-prominence rule and the SEC’s enforcement posture in the context of the SEC’s concern that some companies present non-GAAP financial measures in a manner that inappropriately gives the non-GAAP measures greater authority than the comparable GAAP financial measures. Findings Although the appropriate use of non-GAAP financial measures can enhance investor understanding of a company’s business and operating results, investors could be misled about the company’s GAAP results by disclosures that unduly highlight non-GAAP measures. The SEC’s enforcement action signals a focus on the manner in which companies present non-GAAP financial measures as well as on how they calculate the measures. Originality/value This article provides expert guidance on a major SEC disclosure requirement from an experienced securities lawyer.

SEC framework and no-action letter provide guidance on analyzing whether a digital asset is a security

2019 ◽  
Vol 20 (4) ◽  
pp. 68-71
Author(s):  
Kenneth J. Berman ◽  
Morgan J. Hayes ◽  
Matthew E. Kaplan ◽  
Byungkwon Lim ◽  
Gary E. Murphy ◽  
...  
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Investment Funds ◽  
Content Type ◽  
Market Participants ◽  
Securities Investment Funds ◽  
The Us ◽  
Digital Asset ◽  
Digital Assets

Purpose To analyze and draw conclusions from the “Framework for ‘Investment Contract’ Analysis of Digital Assets” (the “Framework”), released by the US Securities and Exchange Commission (the “SEC”) on April 3, 2019, and the SEC’s corresponding no-action letter to TurnKey Jet, Inc. (“TKJ”), which is the SEC’s first no-action letter publicly agreeing with the view that the digital asset described therein is not a security. Design/Methodology/Approach Explains how the Framework assists market participants in analyzing whether a digital asset is a security, by applying the Howey factors for identifying an investment contract. Discusses the SEC’s TKJ Letter, highlighting the factors the SEC emphasized in its analysis of the Framework. Findings While largely reiterating prior guidance, the Framework provides a helpful overview of the SEC’s views on when a digital asset is a security and how to properly analyze the prongs of Howey with respect to digital assets. The Framework also leaves certain important questions unanswered, including, for example, whether digital assets distributed by means of a so-called “Airdrop” are securities under the Framework, and the extent to which the Framework is meant to interact with digital assets that were issued or otherwise operate on platforms that are primarily overseas. Originality/Value Expert guidance from lawyers with broad experience in financial services, securities, investment funds, derivatives, and digital assets regulation and compliance.

The SEC Speaks 2018: the US Securities and Exchange Commission’s current priorities and conference overview

2018 ◽  
Vol 19 (3) ◽  
pp. 1-4
Author(s):  
Gerald J. Russelo ◽  
Stephen L. Cohen ◽  
Jose F. Sanchez
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Regulatory Compliance ◽  
Securities And Exchange Commission ◽  
Financial Industry ◽  
Content Type ◽  
Market Participants ◽  
The Us ◽  
Past Experiences ◽  
Insight Into

Purpose This paper aims to highlight certain comments made by US Securities and Exchange Commission (SEC) officials, which may provide insight into compliance and enforcement issues that may be important for market participants, including broker-dealers, investment advisors and reporting companies, in the future. Design/methodology/approach This paper explains comments made by SEC officials and highlights potential regulatory issues based on past experiences of attorneys within the firm, past comments made by the SEC and Financial Industry Regulatory Authority and past regulatory exam results. Findings This paper summarizes remarks from the recent SEC Speaks 2018 Conference conducted by SEC officials related to the Commission’s regulatory and enforcement priorities. Issuers, brokers, advisors and other financial organizations should familiarize themselves with the themes and guidance discussed at the Conference to prepare for regulatory compliance challenges in the upcoming year. Originality/value Practical guidance from experienced securities and financial services lawyers.

SEC adopts “crowdfunding” rules for start-up businesses: an easy way to bet on the next Google?

2016 ◽  
Vol 17 (1) ◽  
pp. 117-121
Author(s):  
Stuart Gelfond ◽  
Burcin Eren
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
The Internet ◽  
Content Type ◽  
Disclosure Requirements ◽  
Start Up ◽  
The Us ◽  
Start Ups ◽  
Jobs Act

Purpose To summarize the technical guidelines for complying with the final crowdfunding rules issued by the US Securities and Exchange Commission (“SEC”) after more than three years of consideration pursuant to the Jumpstart Our Business Startups Act (“JOBS Act”) to permit companies to offer and sell securities through crowdfunding. Design/methodology/approach Gives an overview of the JOBS Act and the proposed and final crowdfunding rules issued by the SEC; explains how start-ups and other companies can qualify under the final rules; summarizes the disclosure requirements for the issuers; explains the final rules regarding intermediary platforms; and summarizes the proposed rules to facilitate intrastate and regional securities offerings. Findings While new crowdfunding rules will enable start-up companies to raise money through the Internet in ways that were previously prohibited, the success of these rules in helping start-ups to raise capital easily and efficiently is still to be seen, as there are still significant restrictions and procedural hurdles for a would-be crowdfunding issuer, which makes crowdfunding costly, especially compared to other forms of capital raising. Originality/value Provides an overview and summary of the rules from experienced securities lawyers so that start-up companies and investors would be able to comply with the new rules.

SEC adopts rules to modernize and simplify disclosure

2019 ◽  
Vol 20 (2) ◽  
pp. 1-8
Author(s):  
Laura D. Richman ◽  
David S. Bakst ◽  
Robert F. Gray ◽  
Michael L. Hermsen ◽  
Anna T. Pinedo ◽  
...  
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Confidential Information ◽  
Content Type ◽  
Disclosure Requirements ◽  
The Us ◽  
Rule Changes ◽  
Practical Guidance ◽  
Material Information ◽  
Practical Implications

Purpose To describe the modernization and simplification amendments of certain disclosure requirements of Regulation S-K and related rules and forms recently adopted by the US Securities and Exchange Commission (SEC). Design/methodology/approach This article provides an overview of the amendments, their effective dates and related practical considerations for companies. Findings The amendments cover many provisions within Regulation S-K and affect various forms that rely on the integrated disclosure requirements of Regulation S-K. The amendments are designed to enhance the readability and navigability of SEC filings, to discourage repetition and disclosure of immaterial information and to reduce the burdens on registrants, all while still providing material information to investors. The amendments contain several changes relating to confidential information contained in exhibits. For consistency, parallel amendments have been adopted to rules other than Regulation S-K, as well as to forms for registration statements and reports. Practical implications Most of the amendments are effective May 2, 2019. The amendments relating to the redaction of confidential information in certain exhibits became effective April 2, 2019. Given these dates, companies should review the rule changes implemented by the amendment now and consider how they will impact their disclosure in upcoming SEC filings. Originality/value Practical guidance from experienced lawyers in the Corporate & Securities practice.

SEC reporting obligations for insiders and large traders under Section 13 and Section 16 of the Exchange Act

2019 ◽  
Vol 20 (3) ◽  
pp. 39-53
Author(s):  
Arthur L. Zwickel ◽  
Keith D. Pisani ◽  
Alicia M. Harrison
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Individual Investors ◽  
Content Type ◽  
Disclosure Requirements ◽  
Beneficial Ownership ◽  
Expert Analysis ◽  
Investment Advisers ◽  
Trading Restrictions ◽  
A Current

Purpose The purpose of this paper is to provide investment advisers, broker dealers, individual investors and other securities firms with a current and detailed summary of the reporting regime under Sections 13 and 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) and guidance on how to comply with the disclosure requirements of the U.S. Securities and Exchange Commission (the “SEC”) on Schedule 13D, Schedule 13G, Form 13F, Form 13H and Forms 3, 4 and 5. Design/methodology/approach The approach of this paper discusses the transactions or beneficial ownership interests in securities that trigger a reporting requirement under Section 13 and/or Section 16 of the Exchange Act, identifies the person or persons that have the obligation to file reports with the SEC, details the information required to be disclosed in the publicly available reports, and explains certain trading restrictions imposed on reporting persons as well as the potential adverse consequences of filing late or failing to make the requisite disclosures to the SEC. Findings The SEC continues to provide updated guidance on the disclosure requirements under Sections 13 and 16 of the Exchange Act, which individual investors and securities firms – largely insiders – must take into account when filing any new or amended reports on Schedule 13D, Schedule 13G, Form 13F, Form 13H and Forms 3, 4 and 5. Originality/value This article provides expert analysis and guidance from experienced securities lawyers.

Parties push to enforce statutory time limits on SEC enforcement actions

2015 ◽  
Vol 16 (3) ◽  
pp. 30-32
Author(s):  
Benjamin Neaderland ◽  
Jared Cohen
Keyword(s):  
Design Methodology ◽  
District Of Columbia ◽  
Securities And Exchange Commission ◽  
Courts Of Appeals ◽  
Content Type ◽  
Time Limits ◽  
Court Of Appeals ◽  
Securities Law ◽  
The Us ◽  
Practical Implications

Purpose – To alert companies and individuals subject to regulation and investigation by the US Securities and Exchange Commission (SEC) of potential arguments to enforce time limits on enforcement actions that have heretofore commonly been ignored. Design/methodology/approach – Analyzes two cases - one recently decided and one pending - in US Courts of Appeals, explains significance of issues at stake. Findings – The Courts of Appeals for District of Columbia Circuit has recently reviewed, and the Court of Appeals for the 11th Circuit will soon decide whether statutory timing provisions effectively remove SEC power to bring enforcement actions past their deadlines, at least in some circumstances. Practical implications – Depending on the outcomes of the cases, companies and individuals may gain a new procedural defense or two against SEC enforcement actions. They may also expect the SEC to respond by more actively seeking tolling agreements, and/or being more cautious in issuing Wells notices. Originality/value – Guidance based on pending decisions interpreting US securities law, may bring regulatory adjustments to agency practice and procedure.

High-frequency traders: a review of the challenges in registering them as dealers

2014 ◽  
Vol 15 (3) ◽  
pp. 3-9
Author(s):  
Mark Fitterman ◽  
Ignacio Sandoval
Keyword(s):  
High Frequency ◽  
Design Methodology ◽  
Analytical Framework ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Market Participants ◽  
Concise Overview

Purpose – To describe some of the challenges that the Securities and Exchange Commission (SEC) will face in requiring that high-frequency traders register as dealers. Design/methodology/approach – This paper provides a brief overview of the dealer-trader distinction, an analytical framework under which some high-frequency traders have avoided registration with the SEC as dealers. It then explains the difficulties the SEC will encounter in bringing high-frequency traders within its regulatory umbrella as dealers. In particular, the paper outlines some of the interpretive challenges the SEC encounter as well as challenges to justifying the economics of any proposal. Findings – While the SEC has yet to formally propose rules in this area, the interpretive vehicle it uses could have repercussions for other market participants that rely on the dealer-trader distinction to avoid having to register as dealers with the SEC. Originality/value – The paper provides practical insights into the issues the SEC will have to address if it proposes to bring high-frequency traders within its regulatory umbrella as dealers. In addition, it provides a concise overview of the dealer-trader distinction based on statements by the SEC and its staff.

scholarly journals Corporate governance and executive perquisites

2017 ◽  
Vol 16 (1) ◽  
pp. 21-45 ◽  
Author(s):  
Angela Andrews ◽  
Scott Linn ◽  
Han Yi
Keyword(s):  
Corporate Governance ◽  
Design Methodology ◽  
Ordinary Least Squares ◽  
Securities And Exchange Commission ◽  
Corporate Disclosure ◽  
Content Type ◽  
Listed Firms ◽  
The Public ◽  
Disclosure Requirements ◽  
Rule Change

Purpose The purpose of this paper is to examine the relation between executive perquisite consumption and indicators of corporate governance after the Securities and Exchange Commission (SEC) expanded the disclosure requirements related to perquisites. Design/methodology/approach This study uses ordinary least squares and Tobit regressions to examine the dollar value of perquisites consumed, the number of perquisites consumed and the types of perquisites consumed. Findings The analysis shows that firms with weak corporate governance are more likely to award perquisites to executives. Firms characterized as being more prone to the presence of agency problems are associated with greater levels of perquisite consumption. Finally, there is evidence that not all perquisite consumptions can be attributed to an agency problem. Efficiently operating firms are associated with greater levels of perquisite consumption as are larger firms. Research limitations/implications The authors examine firms in the period immediately after the SEC initiated the expanded disclosures. This may limit the generalizability of the results to other exchange-listed firms that changed their perquisite policy as a result of the rule change. Originality/value The paper extends the literature on corporate governance and mandatory corporate disclosure by investigating the association between corporate governance characteristics and perquisite consumption. This paper examines this relation immediately after the SEC expanded the disclosures surrounding perquisites to provide the public with more transparent disclosures.

SEC adopts rule to implement Dodd-Frank CEO pay ratio disclosure requirement

2016 ◽  
Vol 17 (1) ◽  
pp. 122-130
Author(s):  
Richard J. Parrino
Keyword(s):  
Design Methodology ◽  
Chief Executive ◽  
Securities And Exchange Commission ◽  
Total Compensation ◽  
Content Type ◽  
Meaningful Information ◽  
Depth Analysis ◽  
Ceo Pay ◽  
Annual Total ◽  
Disclosure Requirement

Purpose This article examines the rule issued by the Securities and Exchange Commission in August 2015 that requires most SEC-reporting companies to disclose annually the ratio of the annual total compensation of their chief executive officer to the median of the annual total compensation of their employees other than the CEO. Design/methodology/approach This article provides an in-depth analysis of the operation of the controversial pay ratio disclosure rule against the backdrop of concerns expressed by many commenters on the rule proposal, as well as by the two Commissioners who dissented from adoption of the rule, that the disclosure will not provide meaningful information to investors and will be excessively costly and burdensome for companies to produce. Findings The SEC fashioned the final pay ratio disclosure rule with a vaguely defined statutory purpose to guide it and a heavy volume of comments on its rule proposal that urged widely disparate approaches to implementation. In overhauling the proposed rule, the SEC sought to satisfy its mandate under the Dodd-Frank Act while providing companies with flexibility in implementing the new rule that it believes will reduce compliance costs and burdens. Originality/value This article provides expert guidance on a major new SEC disclosure requirement from experienced securities lawyers.

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