1700 Palm Beach Lakes Blvd, Suite 820

West Palm Beach, FL

(800) 341-2684

Call Toll Free

Contact us

Online Inquiries 24/7

Laura Anthony Esq

MAKE VALUED ALLIANCES

GAAP

Introducing The OTCID

OTC Markets has announced the launch of a new market tier.  Effective July 2025, Pink Current will become the OTCID, a basic reporting market requiring companies to meet minimal current information disclosures and provide management certifications.  OTC Markets will still maintain the Pink Limited and Expert Market tiers for companies that do not qualify for the OTCID.  OTC Markets has not yet published all of the requirements for the OTCID, but I suspect they will be similar to the existing Pink Current, with the addition of the management certifications.

I support the change and new branding opportunity.  OTC Markets have struggled in recent years, primarily as a result of an inability for OTC Markets traded companies to obtain institutional financing or underwriter/placement agent banker support.  Forever the optimist, the change could be just what is needed to revitalize the OTC Markets as a venture market place for U.S. micro-cap companies.

OTCID

Currently, the OTC Markets divides issuers into

Read More »

November 26, 2024

SEC Publishes Sample Comment Letter Regarding XBRL Disclosure

Back in June, 2018, the SEC adopted the Inline XBRL requirements (see HERE) and since that time almost all new disclosure rules require either XBRL tagging or Inline XBRL.  In December 2022 a new law was passed requiring the SEC to “establish a program to improve the quality of the corporate financial data filed or furnished by issuers under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”),” causing the SEC to focus even more on XBRL use.  As a result, in September 2023, the SEC published a sample letter to companies regarding their XBRL disclosures.

The sample letter consists of six comments, which I have included in full below followed by a short commentary on the point.

  1. Your filing does not include the required Inline XBRL presentation in accordance with Item 405 of Regulation S-T. Please file an amendment to the filing to include the required Inline XBRL presentation.
Read More »
November 21, 2023

XBRL – Covered Forms

The last time I wrote about XBRL was related to the 2018 adoption of Inline XBRL which is now fully effective for all companies (see HERE).  Although I gave an overview of Inline XBRL, that blog did not cover exactly what SEC forms need to be edgarized using XBRL.   I’ll cover that now.

XBRL Requirements

XBRL requirements currently apply to operating companies that prepare their financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) or in accordance with International Financial Reporting Standards (“IFRS”).  Operating companies (as opposed to a new initial public offering) are required to submit financial statements and any applicable financial statement schedules in XBRL with certain Exchange Act reports and Securities Act registration statements. The 2018 adoption of inline XBRL allowed companies to embed XBRL data directly into an HTML document, eliminating the need to tag a copy of the information in a separate XBRL exhibit. Inline XBRL is both human-readable and machine-readable

Read More »

June 13, 2023

SEC Issues Additional C&DI On Use Of Non-GAAP Measures

On December 13, 2022, the SEC issued seven new Compliance & Disclosure Interpretations (C&DI) related to the use of non-GAAP financial measures, the first new C&DI on the subject since 2018. Several of the new C&DI update or replace the language of prior existing C&DI.  The C&DI cover revenue recognition, misleading information and GAAP reconciliation, in some cases replacing a principles-based response with a more prescriptive approach.

The SEC permits companies to present non-GAAP financial measures in their public disclosures subject to compliance with Regulation G and Item 10(e) of Regulation S-K.  Regulation G and Item 10(e) require reconciliation to comparable GAAP numbers, the reasons for presenting the non-GAAP numbers, and govern the presentation format itself including requiring equal or greater prominence to the GAAP financial information.

GAAP continues to be and has consistently been criticized by the marketplace in general, with many institutional investors publicly denouncing the usefulness of the accounting standard.  Approximately 90% of companies provide

Read More »

April 25, 2023

OTCQB And OTCQX Rule Changes

Effective October 1, 2020, the OTCQB and OTCQX tiers of OTC Markets have instituted amendments to their rules, including an increase in fees.

The OTC Markets divide issuers into three (3) levels of quotation marketplaces: OTCQX, OTCQB and OTC Pink Open Market. The OTC Pink Open Market, which involves the highest-risk, highly speculative securities, is further divided into three tiers: Current Information, Limited Information and No Information. Companies trading on the OTCQX, OTCQB and OTC Pink Current Information tiers of OTC Markets have the option of reporting directly to OTC Markets under its Alternative Reporting Standards.  The Alternative Reporting Standards are more robust for the OTCQB and OTCQX in that they require audited financial statements prepared in accordance with U.S. GAAP and audited by a PCAOB qualified auditor in the same format as would be included in SEC registration statements and reports.

As an aside, companies that report to the SEC under Regulation A and foreign companies that

Read More »

December 15, 2020

Nasdaq Proposed Rule Changes To Its Discretionary Listing And Continued Listing Standards

On April 21, 2020, the SEC Chairman Jay Clayton and a group of senior SEC and PCAOB officials issued a joint statement warning about the risks of investing in emerging markets, especially China, including companies from those markets that are accessing the U.S. capital markets (see HERE).  Previously, in December 2018, Chair Clayton, SEC Chief Accountant Wes Bricker and PCAOB Chairman William D. Duhnke III issued a similar cautionary statement, also focusing on China (see HERE).

Following the public statements, in June 2020, Nasdaq issued new proposed rules which would make it more difficult for a company to list or continue to list based on the quality of its audit, which could have a direct effect on companies based in China.

Nasdaq Proposed Rule Changes

On June 2, 2020, the Nasdaq Stock Market filed a proposed rule change to amend IM-5101-1, the rule which allows Nasdaq to use its discretionary authority to deny listing or continued listing

Read More »

August 4, 2020

Disclosures Related To COVID-19 – SEC Updates

Last week the SEC Office of the Chief Accountant (OCA) made a public statement on the importance of high-quality financial reporting for investors in light of Covid-19 on the same day that the Division of Corporation Finance issued an updated Disclosure Guidance Topic No. 9A on operations, liquidity, and capital resources disclosures related to the virus.  Disclosure Guidance Topic No. 9A supplements the previously issued Topic No. 9 (see HERE) and follows the SEC’s virtual Investor Advisory Committee (“IAC”) meeting where investors testified as to additional information that should be relayed to the capital markets by public companies (see HERE).

OCA Statement on Financial Reporting

On April 3, 2020, the SEC Office of the Chief Accountant (OCA) made its first public statement on the importance of high-quality financial reporting for investors in light of Covid-19.  At that time, many companies were in the process of preparing Q1 results and reports.  Now that Q2 is coming to a

Read More »

June 30, 2020

Disclosures Related To COVID-19

The SEC has been reiterating the need for robust disclosures related to the impact of COVID-19 on publicly reporting companies.  In the last few weeks I have written about some of the guidance issued by the SEC including Disclosure Guidance Topic No. 9.  Since that time the SEC has continued to issue guidance in the form of public statements.  This blog will summarize the SEC guidance and statements on disclosures up to date, and include a sample risk factor for inclusion in SEC reports.

Public Statement by Chair Jay Clayton and Director of the Division of Corporation Finance, William Hinman

On April 8, 2020, SEC Chairman Jay Clayton and William Hinman, the Director of the Division of Corporation Finance, issued a joint public statement on the importance of disclosure during the COVID-19 crisis.

Before I get into summarizing the statement, my personal thought is that although there are many reasons why disclosure is important, including the basic premise that the

Read More »

April 14, 2020

Relief For Persons Affected By The Coronavirus

Last week I published a blog summarizing the relief granted by the SEC for public companies and capital markets participants impacted by the coronavirus (Covid-19) (see HERE).  Just as Covid-19 rapidly evolves, so have the regulators response.  The SEC has now expanded the relief and issued guidance on public company disclosures related to Covid-19.

While we work to complete the usual filings while in quarantine, a new conversation is starting to develop at a rapid pace.  That is, the conversation of opportunity and the accelerating of a more technologically driven economy than ever before.  Businesses and service providers must stay nimble and ready to serve the ever changing needs of entrepreneurs and the capital markets – I know we are!

Extension in SEC Reporting Filing Deadlines

On March 25, 2020, the SEC extended its prior conditional relief order such that periodic filings that would have been due from between March 1 and July 1, 2020 can avail themselves of

Read More »

March 31, 2020

OTCQB And OTC Pink Rule Changes

In December 2019 the OTC Markets updated its Pink Disclosure Guidelines and Attorney Letter Agreement and Guidelines.  The Pink disclosure guidelines and attorney letter apply to companies that elect to report directly to OTC Markets pursuant to its Alternative Reporting Standard.  Furthermore, in January 2020 OTC Markets amended the OTCQB standards related to the disclosure of convertible debt and notification procedures for companies undergoing a change in control.  The OTCQB also updated its criteria for determining independence of directors, and added additional transfer agent requirements for Canadian Companies.

The OTC Markets divide issuers into three (3) levels of quotation marketplaces: OTCQX, OTCQB and OTC Pink Open Market. The OTC Pink Open Market, which involves the highest-risk, highly speculative securities, is further divided into three tiers: Current Information, Limited Information and No Information. Companies trading on the OTCQX, OTCQB and OTC Pink Current Information tiers of OTC Markets have the option of reporting directly to OTC Markets under its Alternative

Read More »

February 18, 2020

SEC Proposes Amendments To Acquisitions And Dispositions Of Businesses

In May of this year, the SEC proposed amendments to the financial statements and other disclosure requirements related to the acquisitions and dispositions of businesses.  In September 2015, the SEC issued a request for public comment related to disclosure requirements for entities other than the reporting company itself, including subsidiaries, acquired businesses, issuers of guaranteed securities and affiliates.  See my blog HERE.  Taking into account responses to portions of that request for comment, in the summer of 2018, the SEC adopted final rules to simplify the disclosure requirements applicable to registered debt offerings for guarantors and issuers of guaranteed securities, and for affiliates whose securities collateralize a company’s securities.  See my blog HERE.

The SEC is now proposing amendments to Rules 3-05, 3-14, and Article 11 of Regulation S-X and adding new Rule 6-11.  The amendments would also make several related conforming rule and form changes.  Rule 3-05 was included in the September 2015 request for comment.  Like

Read More »

September 10, 2019

Forward Looking Statements Disclaimers

Forward-looking statements disclaimers appear in almost all things SEC and public company related from registration statements to reports filed in accordance with the Securities Exchange Act to press releases.  Like many disclaimers, they are usually looked past by readers, including at times by the attorneys reviewing or preparing the documents.  On many occasions we will have a new client come to the firm that has been using the same forward-looking statements disclaimer for years that has perpetually been cut and pasted into every document, and which would fail to provide the intended protections if ever tested.

The Private Securities Litigation Reform Act of 1995

Many companies start a forward-looking statements disclaimer paragraph with the sentence “[I]nformation contained herein contains ‘forward looking statements’ within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended.”  Sections 27A and 21E, both created by the Private Securities Litigation

Read More »

September 3, 2019

SEC Adopts Amendments to Simplify Disclosure Requirements

In August the SEC voted to adopt amendments to certain disclosure requirements in Regulations S-K and S-X (the “S-K and S-X Amendments”) as well as conforming changes throughout the federal securities laws and related forms. The amendments are intended to simplify and update disclosure requirements that are redundant, duplicative, overlapping, outdated or superseded with the overriding goal of reducing compliance burdens on companies without reducing material information for investors. The new amendments finalize and adopt the proposed rules that had previously been issued on July 13, 2016. See my blog on the proposed rule change HERE. The final rule changes were substantially, but not entirely, as proposed.

The Regulation S-X and S-K Amendments come as a result of the Division of Corporation Finance’s Disclosure Effectiveness Initiative and as required by Section 72002 of the FAST Act. The proposing release also requested public comment on a number of disclosure requirements that overlap with, but require information incremental to, U.S. GAAP

Read More »

October 16, 2018

SEC Adopts Inline XBRL

On June 28, 2018, the SEC adopted amendments to the XBRL requirements to require the use of Inline XBRL for financial statement information and fund risk/return summaries. Inline XBRL involves embedding XBRL data directly into the filing so that the disclosure document is both human-readable and machine-readable. Accordingly, no separate XBRL filings are required. The amendments also eliminate the requirement for companies to post XBRL data on their websites.

In 2009 the SEC adopted rules requiring companies to provide the information from the financial statements accompanying their registration statements and periodic and current reports in machine-readable format using XBRL by submitting it to the SEC as exhibits to their filings and posting it on their websites, if any. Since that time, however, many industry participants have expressed concerns regarding the quality of, extent of use of, and cost to create XBRL data. In fact, the SEC itself has discovered quality issues with the data in XBRL. As with all

Read More »

August 21, 2018

SEC Issues Additional C&DI On Use Of Non-GAAP Measures

On April 4, 2018, the SEC issued two new Compliance & Disclosure Interpretations (C&DI) related to the use of non-GAAP financial measures by public companies in connection with business combinations. The two new C&DI follow two other C&DI which were issued on October 17, 2017 (see HERE).

The SEC permits companies to present non-GAAP financial measures in their public disclosures subject to compliance with Regulation G and Item 10(e) of Regulation S-K. Regulation G and Item 10(e) require reconciliation to comparable GAAP numbers, the reasons for presenting the non-GAAP numbers, and govern the presentation format itself including requiring equal or greater prominence to the GAAP financial information.

My prior two-part blog series on non-GAAP financial measures, Regulation G and Item 10(e) of Regulation S-K can be read HERE  and HERE.

GAAP continues to be and has consistently been criticized by the marketplace in general, with many institutional investors publicly denouncing the usefulness of the accounting standard. Approximately

Read More »

August 7, 2018

The Division of Corporation Finance’s Disclosure Review And Comment Process

Those that regularly read my blog know that I sometimes like to go back to basics. This blog will revisit and discuss the SEC’s Division of Corporation Finance (“CorpFin”) comment and review process. Back in March 2016, I wrote about the SEC comment and review process, including a description of the internal review process, review levels and breakup of industry sector reviewers. That blog can be read HERE.  Since that time, the SEC has eliminated the Tandy Letter requirement. See HERE. Furthermore, on March 22, 2018, CorpFin updated its “Filing Review Process” page on the SEC website.

At the end of each calendar year, the big four accounting firms generally publish studies on CorpFin’s Comment Priorities. Their studies, and other recent publications, uniformly found that the number of comments, especially in a registration process, has dramatically declined.  I have noticed this trend as well in my practice.

Also consistent in reports is a list of recent

Read More »

April 10, 2018

SEC Issues C&DI On Use Of Non-GAAP Measures

On October 17, 2017, the SEC issued two new Compliance & Disclosure Interpretations (C&DI) related to the use of non-GAAP financial measures by public companies. The SEC permits companies to present non-GAAP financial measures in their public disclosures subject to compliance with Regulation G and Item 10(e) of Regulation S-K. Regulation G and Item 10(e) require reconciliation to comparable GAAP numbers, the reasons for presenting the non-GAAP numbers, and govern the presentation format itself including requiring equal or greater prominence to the GAAP financial information.

My prior two-part blog series on non-GAAP financial measures, Regulation G and Item 10(e) of Regulation S-K can be read HERE and HERE.

GAAP continues to be criticized by the marketplace in general, with many institutional investors publicly denouncing the usefulness of the accounting standard. Approximately 90% of companies provide non-GAAP financial metrics to illustrate their financial performance and prospects. As an example, EBITDA is a non-GAAP number. I expect continued friction

Read More »

January 30, 2018

SEC Chief Accountant Speaks On Financial Reporting

Nominate Us For ABA Journal’s Top Blog- HERE

——————————————————————————————————

On June 8, 2017, the SEC Chief Accountant, Wesley R. Bricker, gave a speech before the 36th Annual SEC and Financial Reporting Institute Conference. The speech, which this blog summarizes, was titled “Advancing the Role of Credible Financial Reporting in the Capital Markets.” As usual, I’ve included commentary throughout.

Introduction and Role of the PCAOB

The speech begins with some general background comments and a discussion of the role of the PCAOB. Approximately half of Americans invest in the U.S. equity markets, either directly or through mutual funds and employer-sponsored retirement plans. The ability to judge the opportunities and risks and make investment choices depends on the quality of information available to the public and importantly, the quality of the accounting and auditing information. Mr. Bricker notes that “[T]he credibility of financial statements have a direct effect on a company’s cost of capital, which is reflected in the price that

Read More »

July 11, 2017

SEC Issues Proposed Regulation S-K And S-X Amendments

On July 13, 2016, the SEC issued a 318-page proposed rule change on Regulation S-K and Regulation S-X to amend disclosures that are redundant, duplicative, overlapping, outdated or superseded (S-K and S-X Amendments). The proposed rule changes follow the 341-page concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements issued on April 15, 2016. See my two-part blog on the S-K Concept Release HERE and HERE.

The proposed S-K and S-X Amendments are intended to facilitate the disclosure of information to investors while simplifying compliance efforts by companies. The proposed S-K and S-X Amendments come as a result of the Division of Corporation Finance’s Disclosure Effectiveness Initiative and as required by Section 72002 of the FAST Act. Prior to the issuance of these S-K and S-X Amendments, on June 27, 2016, as part of the same initiative, the SEC issued proposed amendments to the definition of “Small Reporting Company” (see

Read More »

August 9, 2016

SEC Issues New C&DI On Use Of Non-GAAP Measures; Regulation G – Part 2

On May 17, 2016, the SEC published 12 new Compliance & Disclosure Interpretations (C&DI) related to the use of non-GAAP financial measures by public companies.  The SEC permits companies to present non-GAAP financial measures in their public disclosures subject to compliance with Regulation G and item 10(e) of Regulation S-K.  Regulation G and Item 10(e) require reconciliation to comparable GAAP numbers, the reasons for presenting the non-GAAP numbers, and govern the presentation format itself including requiring equal or greater prominence to the GAAP financial information.

This is the second part in a two-part blog series on the use of non-GAAP financial information.  In the first blog I summarized the new C&DI, and in this blog I am reviewing Regulation G and Item 10(e) of Regulation S-K.  The first blog in the series can be read HERE.

Background

In the last couple of months SEC Chair Mary Jo White, SEC Deputy Chief Accountant Wesley Bricker, Chief Accountant James Schnurr and

Read More »

June 7, 2016

SEC Issues New C&DI On Use Of Non-GAAP Measures; Regulation G – Part 1

On May 17, 2016, the SEC published 12 new Compliance & Disclosure Interpretations (C&DI) related to the use of non-GAAP financial measures by public companies.  The SEC permits companies to present non-GAAP financial measures in their public disclosures subject to compliance with Regulation G and item 10(e) of Regulation S-K.  Regulation G and Item 10(e) require reconciliation to comparable GAAP numbers, the reasons for presenting the non-GAAP numbers and govern the presentation format itself including requiring equal or greater prominence to the GAAP financial information.

The new C&DI follows a period of controversy, press and speeches on the subject.  In the last couple of months SEC Chair Mary Jo White, SEC Deputy Chief Accountant Wesley Bricker, Chief Accountant James Schnurr and Corp Fin Director Keith Higgins have all given speeches at various venues across the company admonishing public companies for their increased use of non-GAAP financial measures.  Mary Jo White suggested new rule making may be on the horizon,

Read More »

May 24, 2016

SEC Rules – The Commission Publishes List of New Regulations for Review

The SEC has published its annual list of rules that are scheduled to be reviewed this year and to invite comment from the public as to whether these rules should be continued without change, amended or rescinded.  The SEC is required to review rules each year that have a significant impact on small entities.

The current list includes 25 rules that were adopted by the SEC in 2003.  I note that many of these rules were enacted as a follow-on to the Sarbanes Oxley Act of 2002 and in response to the then current financial crisis.  Persons interested in submitting comments to the SEC regarding these rules can do so through the SEC website.  I have ordered the list such that rules that most impact my clients appear first.

Below is a list of rules that will be reviewed this year for potential amendment and a brief summary of the existing rule.

Conditions for Use of Non-GAAP Financial Measures –

Read More »

January 13, 2015

Categories

Securities Law Blog
Linkedin-in Rss

Contact Information

Recent Posts

Legal Resources

Tweets

DEVELOPED AND MANAGED BY

Featured On

Apple Youtube Twitter
Apple Facebook-f Twitter Linkedin-in
  • Anthony L.G, PLLC. All Rights Reserved.

Contact Author

Laura Anthony Esq

Have a Question for Laura Anthony?