Non-GAAP headlines hit the bottom line: SEC imposes civil penalties for lack of “equal prominence”

Non-GAAP headlines hit the bottom line: SEC imposes civil penalties for lack of “equal prominence”


By: Lee T. Barnum, Joshua Wechsler, John Lawrence, Ezra Schneck, Idan Shkaltz

On December 26, 2018, the SEC ordered a registrant to pay a $100,000 civil penalty and to cease and desist from further violations of Section 13(a) of the Exchange Act and Rule 13a-11 thereunder in response to the registrant's alleged failure to comply with Regulation S-K Item 10(e)'s “equal or greater prominence” standard for the use of non-GAAP financial measures.  In addition to serving as a reminder that curbing noncompliant use of non-GAAP measures remains a significant priority of the SEC's Division of Corporation Finance, this enforcement action may signal increased willingness by the SEC to exercise its full regulatory power in addressing instances of alleged noncompliance.

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