New compliance guidance by SEC staff signals increased scrutiny of non-GAAP financial measures

2016 ◽  
Vol 17 (4) ◽  
pp. 23-33 ◽  
Author(s):  
Richard J. Parrino
Keyword(s):  
Design Methodology ◽  
Operating Performance ◽  
Securities And Exchange Commission ◽  
Appropriate Use ◽  
Content Type ◽  
Financial Measures ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
Depth Analysis ◽  
Disclosure Requirement

Purpose This article examines compliance and disclosure interpretations issued by the staff of the Securities and Exchange Commission in May 2016 that provide guidance to SEC-reporting companies on how they can use financial measures not prepared in accordance with generally accepted accounting principles in a manner that complies with SEC rules governing the presentation of non-GAAP measures in SEC filings and other public communications. Design/methodology/approach This article provides an in-depth analysis of the new interpretive guidance in the context of the increasing use of non-GAAP financial measures by SEC-reporting companies and the SEC’s concern that some companies have been using non-GAAP measures inappropriately to present a materially different picture of their operating performance than investors can discern from financial measures prepared in accordance with GAAP. Findings Although the appropriate use of non-GAAP financial measures can enhance investor understanding of a company’s business and operating results, a relatively permissive SEC attitude towards the use of non-GAAP measures in recent years has emboldened some companies to increase their reliance on non-GAAP measures in a manner the SEC views as inconsistent with its rules. The SEC staff’s new guidance signals a renewed focus by the SEC on compliance with its requirements concerning the nature of permissible non-GAAP measures and the ways in which companies should present those measures. Originality/value This article provides expert guidance on a major new SEC disclosure requirement from experienced securities lawyers.

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 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.

scholarly journals Non-GAAP earnings: international overview and suggestions for future research

2017 ◽  
Vol 25 (3) ◽  
pp. 318-335 ◽  
Author(s):  
Ana Marques
Keyword(s):  
Corporate Governance ◽  
Design Methodology ◽  
Point Of View ◽  
Future Research ◽  
Accounting Standard ◽  
Content Type ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
Corporate Governance Mechanisms ◽  
Academic Researchers

Purpose The purpose of this paper is to synthesize insights from existing research on the disclosure of non-generally accepted accounting principles (GAAP) earnings, from an international point of view, and to suggest several avenues for future research in this area. Design/methodology/approach In conjunction with the analysis of existing research, the paper examines how different regulators and accounting standard setters have approached the topic of non-GAAP earnings disclosure. Findings The paper shows how non-GAAP earnings have been found to be more informative than GAAP earnings in several scenarios (countries where non-GAAP disclosures are compulsory, countries where these disclosures are voluntary but regulated and countries where they are not regulated). However, in certain circumstances, these disclosures may also mislead investors. Corporate governance mechanisms can curb managers’ opportunistic use of these measures. Originality/value The paper provides the growing number of academic researchers in this emerging area with a foundation and agenda upon which they can build their research.

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.

SEC staff issues guidance on Rule 14a-8 calling for board involvement in evaluating shareholder proposals

2018 ◽  
Vol 19 (1) ◽  
pp. 20-27 ◽  
Author(s):  
Richard J. Parrino ◽  
Alan Dye ◽  
Alex Bahn
Keyword(s):  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Decision Making Process ◽  
Content Type ◽  
Policy Issues ◽  
Shareholder Proposals ◽  
Business Operations ◽  
Depth Analysis ◽  
Board Level ◽  
Directors And Officers

Purpose This paper examines a legal bulletin issued by the staff of the Securities and Exchange Commission (SEC) in November 2017 that provides significant new guidance to SEC-reporting companies on the application of the “ordinary business” and “economic relevance” exceptions in Rule 14a-8 under the Securities Exchange Act of 1934. Rule 14a-8 governs an SEC-reporting company’s obligation to include shareholder proposals in its proxy materials for a shareholder meeting. Design/methodology/approach This paper provides in-depth analysis of the new interpretive guidance against the background of continuing controversy between companies and shareholder-proponents over the bases on which companies should be permitted to exclude from their proxy materials proposals that proponents believe raise social, ethical or other policy issues that are appropriate for shareholder action. Findings In acting on a company’s request to exclude a proposal, the SEC staff must make difficult judgments regarding the connection between policy issues reflected in the proposal and the company’s business operations, which the company’s directors and officers seek to conduct free of inappropriate shareholder oversight. In the new guidance, the staff calls for assistance in making these judgments by soliciting greater board-level involvement in the exclusion determination and encouraging the company in its no-action submission to discuss the board’s analysis and decision-making process. Greater board participation should encourage a more probing assessment of the considerations weighed in these determinations. Originality/value This paper provides expert guidance on a major new SEC disclosure requirement from experienced securities lawyers.

Is agricultural revitalization possible through the climate-smart agriculture: a systematic review and citation-based analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mangirdas Morkunas ◽  
Tomas Balezentis
Keyword(s):  
Design Methodology ◽  
Agricultural Sustainability ◽  
Environmental Footprint ◽  
Independent Research ◽  
Research Directions ◽  
Content Type ◽  
Depth Analysis ◽  
Smart Agriculture ◽  
Scientific Framework ◽  
Research Avenue

PurposeThis paper seeks to identify the prevailing streams in the research of climate-smart agriculture in order to help to conceptualize this new scientific notion and assist in drawing clear borders between climate-smart agriculture, agricultural sustainability and resilience.Design/methodology/approachIn order to conceptualize the climate-smart agriculture (CSA), the current research provides an in-depth bibliometric analysis indicating the prospective research directions in CSA. The findings of this paper are important in guiding the research on creation of climate-smart agriculture across different regions.FindingsThe notion of the CSA covers three main objectives: increased productivity, enhanced resilience and reduced environmental footprint of agriculture. It is found that due to its novelty, the climate-smart notion does not always have its defined research agenda and is considered to be both a constituent part of some other scientific framework (e.g. sustainability) and an independent research avenue.Originality/valueThis paper presents an in-depth analysis of the literature on the CSA. The linkages among the concepts, research centers and research strands are identified via the citation-based analysis.

How firms borrow in international bond markets

2018 ◽  
Vol 26 (1) ◽  
pp. 135-169
Author(s):  
Alberto Fuertes ◽  
Jose María Serena
Keyword(s):  
Emerging Economies ◽  
Design Methodology ◽  
Choice Behavior ◽  
Global Financial Crisis ◽  
Securities And Exchange Commission ◽  
Bond Markets ◽  
Data Set ◽  
Content Type ◽  
Parametric Analyses ◽  
The Global Financial Crisis

Purpose This paper aims to investigate how firms from emerging economies choose among different international bond markets: global, US144A and Eurobond markets. The authors explore if the ranking in regulatory stringency –global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – leads to a segmentation of borrowers. Design/methodology/approach The authors use a novel data set from emerging economy firms, treating them as consolidated entities. The authors also obtain descriptive evidence and perform univariate non-parametric analyses, conditional and multinomial logit analyses to study firms’ marginal debt choice decisions. Findings The authors show that firms with poorer credit quality, less ability to absorb flotation costs and more informational asymmetries issue debt in US144A and Eurobond markets. On the contrary, firms issuing global bonds – subject to full Securities and Exchange Commission requirements – are financially sounder and larger. This exercise also shows that following the global crisis, firms from emerging economies are more likely to tap less regulated debt markets. Originality/value This is, to the authors’ knowledge, the first study that examines if the ranking in stringency of regulation – global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – is consistent with an ordinal choice by firms. The authors also explore if this ranking is monotonic in all determinants or there are firm-specific features which make firms unlikely to borrow in a given market. Finally, the authors analyze if there are any changes in the debt-choice behavior of firms after the global financial crisis.

Are your customer accounts in order? – SEC announces sweep of broker-dealers and implementation of the customer protection rule initiative

2017 ◽  
Vol 18 (1) ◽  
pp. 68-74
Author(s):  
Melissa Beck Mitchum ◽  
Bob Xiong
Keyword(s):  
Current Account ◽  
Design Methodology ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Policies And Procedures ◽  
Practical Guidance ◽  
Reporting Mechanism

Purpose To explain the Customer Protection Rule Initiative announced by the Securities and Exchange Commission (SEC) and offer practical guidance for complying with Rule 15c3-3 under the Securities Exchange Act of 1934. Design/methodology/approach This article discusses Rule 15c3-3 under the Securities Exchange Act of 1934, related interpretative guidance, and the Customer Protection Rule Initiative announced in June 2016 by the SEC. Findings This article concludes that broker-dealers should take advantage of the Customer Protection Rule Initiative’s self-reporting mechanism and use this time to review their current account arrangements with banks, existing internal policies and procedures, and account documentation. Originality/value This article contains valuable information about the SEC’s Customer Protection Rule Initiative and practical compliance guidance from experienced securities lawyers.

Appraisal of the regulatory frameworks for combatting money laundering in Nigeria

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Adegboyega Adekunle Ige
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Design Methodology ◽  
Attorney General ◽  
Securities And Exchange Commission ◽  
Review Of Literature ◽  
Content Type ◽  
Regulatory Frameworks ◽  
Legal Context ◽  
Made In

Purpose A review of literature revealed that many publications on efforts at combatting money laundering focus on two frameworks, namely, legal/legislative and institutional, while overlooking the third and equally important framework – the “regulatory/ supervisory framework.” This paper aims to eradicate the dearth in literature with regards to this third and seldom acknowledged framework and it aims at filling that gap. Design/methodology/approach The analysis took the form of a desk study, which distinguished the three frameworks for combatting money laundering and provided a comprehensive list of the main actors in each regime within the Nigerian legal context. The Money Laundering (Prevention and Prohibition) Act, 2016 was examined in detail. Findings Three categories of regulators were identified and discussed in this paper: the supervisory bodies that regulate the activities of financial institutions, namely, Central Bank of Nigeria, Securities and Exchange Commission and Nigerian Insurance Commission; The Bureau for Money Laundering Control which supervises – designated non-financial institutions and businesses; the Attorney General of the Federation; and (Self-Regulatory Organizations. The Attorney General of the Federation was identified as the prime regulator within the context of the 2016 Act. Suggestions on how the regulators could make the most of their roles were made in the concluding part. Research limitations/implications This paper only considered the Nigerian legal context and only the extant law – the Money Laundering (Prevention and Prohibition) Act, 2016 was critically examined. Originality/value The findings in this paper and the writing approach are original.

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.

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