• SEC Scrutiny Of Non-GAAP Disclosures Likely To Continue
  • April 28, 2017 | Authors: Bret A. Campbell; J. Robert Duncan; Joseph V. Moreno
  • Law Firms: Cadwalader, Wickersham & Taft LLP - Washington Office; Cadwalader, Wickersham & Taft LLP - New York Office
  • Just over 15 years ago, the U.S. Securities and Exchange Commission heralded its first ever cease-and-desist proceedings against an issuer — Trump Hotels and Casinos — for relying on “materially misleading” non-GAAP disclosures in an earnings release.[1] Since then, the SEC’s Division of Corporation Finance has continued to apply scrutiny to the use of non-GAAP disclosures, most recently in a public comment letter to Allergan PLC issued in January 2017, which stated that the SEC planned to “consider whether additional comprehensive non-GAAP staff guidance is appropriate.”[2] With now-President Donald Trump having nominated a new chairman and poised to appoint two additional commissioners, the priorities of the SEC going forward remain unclear. However, based on recent and continuing indications by the Division of Corporation Finance, the Division of Enforcement, and Acting Chairman Michael Piwowar, non-GAAP disclosures are likely to continue to draw scrutiny and should be handled with care.