Company Charged With Non-GAAP Disclosure "Equal or Greater Prominence" Violation

By Randi Morrison posted 12-27-2018 04:56 PM

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The SEC filed Ceast-and-Desist Proceedings against ADT Inc. (NYSE:ADT) for failing to give equal or greater prominence to comparable GAAP measures in two of its earnings releases furnished on Form 8-K in March 2018 (Q4 and FY 2017) and May 2018 (Q1 2018) that included non-GAAP financial measures such as adjusted EBITDA, adjusted net income, and FCF before special items, in violation of Section 13(a) of the Exchange Act and Rule 13a-11. In addition to the cease and desist order, a $100,000 civil monetary penalty was imposed.

See Non-GAAP Financial Measures C&DIs Question 102.10; Davis Polk's memo; these recent Society Alert reports: "SEC Comment Letter Trends & Insights" and "Non-GAAP: SEC's Bricker Elaborates on Audit Committee Oversight Expectations" and this sampling of relevant older Society Alert reports: "Non-GAAP Disclosures: SEC Comment Letters," "Non-GAAP Measures: SEC Staff Comment Letter Focus" and "SEC Issues Guidance on Non-GAAP Financial Measures"; and heaps of additional information & resources on this topic on our website here and here.

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