September 7, 2016

SEC Proposes Mandating Links to Exhibits

Last week, the SEC issued this proposing release that would require companies to include links to exhibits in most SEC filings.  A rule like this would definitely make EDGAR filings more user-friendly. This blog by Davis Polk’s Ning Chiu summarizes the “clunky” way that EDGAR users currently navigate their way to a company’s exhibits:

Currently, anyone trying to access an exhibit that has been incorporated by reference instead of filed with the document must first review the exhibit index to determine which company filing includes a particular exhibit, and then search through the company’s Edgar history to find the exhibit. The SEC believes this process is burdensome, and has now proposed rules that would require a link to each exhibit listed in the exhibit index of any registration statement or report subject to Item 601 of Regulation S-K.

The current format also makes it a little cumbersome to access exhibits that are filed with the document itself – you have to find the exhibit you’re looking for in the document, then back out of the document to a page where separate links to each exhibit appear – and then click on the exhibit that you need.

One potential issue for some filers is that exhibits would need to be filed in HTML – since the ASCII format does not support hyperlinks. The SEC raised this issue in the release, but also noted that during 2015 – over 99% of all filings on the forms that would be affected by the proposal were filed in HTML.

We are posting memos in our “Exhibits” Practice Area.

An International Take on Non-GAAP Numbers

This Simpson Thacher memo discusses guidance on the use of non-GAAP financial information in a new report issued by the “International Organization of Securities Commissioners” (known as “IOSCO”). The memo notes:

Because IOSCO is a consensus-driven supranational organization, its guidance is broader and less specific than the corresponding SEC guidance, and it is subject to interpretation and implementation by relevant national authorities.

Nevertheless, we expect IOSCO’s guidance will have substantial influence in European & other international markets, especially where national authorities have not previously issued their own specific guidance on the subject of financial measures not calculated in accordance with applicable accounting standards or principles.

The memo also notes that IOSCO’s report sets forth 12 principles intended help companies structure their non-GAAP disclosure in an understandable way, while avoiding confusion or misleading disclosures:

In general, the recent SEC guidance on the subject of non-GAAP financial measures is far more detailed and prescriptive than the IOSCO report. There are a number of points on which the SEC and IOSCO largely agree and overlap; however, some of the points emphasized in the SEC guidance do not find their way into the report’s 12 principles.

For example, the SEC’s warning against non-GAAP revenue measures which accelerate the recognition of subscription or long-term contractual revenue which the relevant GAAP requires to be recognized over time does not appear in the IOSCO report. Similarly, the SEC’s specific warning against presentation of non-GAAP liquidity measures on a per-share basis, the guidance on the definition of “funds from operations,” and the SEC’s discussion on the specifics of income tax adjustments each do not have direct parallels in the IOSCO report.

Webcast: “After Brexit! Current Developments in Capital Raising”

Tune in tomorrow for the webcast – “After Brexit! Current Developments in Capital Raising” – to hear Manatt Phelps’ Katherine Blair, Calfee Halter’s Kris Spreen and Davis Polk’s Michael Kaplan explore the latest developments in the capital markets, including alternatives such as PIPEs, registered direct offerings, “at-the-market” offerings, equity line financing and rights offers.

John Jenkins