Handy chart of the day: Recent SEC guidance and rules

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Recent SEC Guidance and Proposed and Final Rules (July 2016)
The following is a list of selected guidance, proposed rules and final rules recently published or promulgated by the Securities
and Exchange Commission (the “SEC”). This list is intended only as a summary of certain key points, and should not be read as
an exhaustive list of all items from the guidance or rules that may be material. For more information, please click on the link in
the first column below, or contact your Summit team member.
Guidance/Rule
(including link)
Description of Guidance/Rule Phase-in
Period
Exemption
for SRC or
EGC?
Amendments to
“Smaller Reporting
Company”
Definition –
Proposed Rules1
On June 27, 2016, the SEC proposed changes to the definition of “smaller
reporting company” (“SRC”). The proposed rules would provide that:
 Companies with less than $250 million of public float permitted to
provide scaled disclosures as a SRC (compared to the current $75
million threshold);
 If a company does not have a public float, it would be permitted to
provide scaled disclosures if its annual revenues are less than
$100 million (compared to the current $50 million threshold); and
 As under the current rules, once a company exceeds either of the
thresholds, it would not qualify as a SRC again until public float or
revenues decrease below a lower threshold. Under the proposal, a
company would qualify as a SRC again only if its public float is less
than $200 million or, if it has no public float, its annual revenues
are less than $80 million.
No change to “accelerated filer” threshold: The SEC is not proposing to
increase the $75 million threshold in the "accelerated filer" definition,
meaning that companies with a float of $75 million or more that would
qualify as SRCs under the proposed rules would still be subject to the
requirements that currently apply to accelerated filers – including
accelerated periodic report filing deadlines and the requirement that
accelerated filers provide an auditor’s attestation of internal controls.
See Exhibit A attached hereto for a table of scaled SRC disclosure
requirements under Reg. S-K and Reg. S-X.
Unknown N/A
1
The comment period for these proposed rules ends 60 days after publication in the Federal Register.

Guidance/Rule
(including link)
Period
Exemption
for SRC or
EGC?
Non-GAAP
Financial Measures
– C&DIs Guidance
This guidance clarifies the rules for using non-GAAP financial measures
under Regulation G:
 Certain presentations of non-GAAP financial measures are
expressly prohibited (e.g., substituting individually tailored
revenue recognition and measurement methods for GAAP
measures as a baseline for calculating non-GAAP earnings, and
non-GAAP measures that adjust for non-recurring charges but not
for non-recurring gains);
 Confirms that certain adjustments, although not explicitly
prohibited, may result in a non-GAAP measure that is misleading
(e.g., presenting a performance measure that excludes normal,
recurring, cash operating expenses necessary to operate a
company’s business could be misleading, or presenting non-GAAP
measure inconsistently between periods);
 GAAP financial measures should be given equal or greater
prominence with non-GAAP financial measures; whether a non-
GAAP measure is more prominent than the comparable GAAP
measure generally depends on the facts and circumstances in
which the disclosure is made, but the SEC indicated it would
consider the following examples of disclosure of non-GAAP
measures as more prominent:
 Providing tabular disclosure of non-GAAP financial measures
without preceding it with an equally prominent tabular
disclosure of the comparable GAAP measures or including the
comparable GAAP measures in the same table;
 Presenting a full income statement of non-GAAP measures or
presenting a full non-GAAP income statement when reconciling
non-GAAP measures to the most directly comparable GAAP
measures;
 Excluding a quantitative reconciliation with respect to a
forward-looking non-GAAP measure in reliance on the
“unreasonable efforts” exception (see below) without disclosing
that fact and identifying the information that is unavailable and
None No

Guidance/Rule
(including link)
Period
Exemption
for SRC or
EGC?
its probable significance in a location of equal or greater
prominence;
 Describing a non-GAAP measure as, for example, “record
performance” or “exceptional” without at least an equally
prominent descriptive characterization of the comparable GAAP
measure;
 A non-GAAP measure that precedes the most directly
comparable GAAP measure (including in an earnings release
headline or caption);
 Omitting comparable GAAP measures from an earnings release
headline or caption that includes non-GAAP measures;
 Providing discussion and analysis of a non-GAAP measure
without a similar discussion and analysis of the comparable
GAAP measure in a location with equal or greater prominence;
and
 Presenting a non-GAAP measure using a style of presentation
(e.g., bold, larger font) that emphasizes the non-GAAP
measure over the comparable GAAP measure.
 Companies are required to provide a quantitative reconciliation of
forward-looking non-GAAP financial measures to the extent
available without “unreasonable efforts,” and if a comparable
GAAP financial measure is not available on a forward-looking
basis, a company must disclose that fact, provide the reconciling
information that is available, and identify the unavailable
information and disclose its probable significance; and
 Non-GAAP liquidity measures (such as free cash flow), EBIT and
EBITDA may not be presented on a per-share basis.

Guidance/Rule
(including link)
Period
Exemption
for SRC or
EGC?
Hedging Policy
Disclosure -
Proposed Rules2
Proposed rules would require companies to disclose whether the company
permits any employee, officer or director of the company to purchase any
financial instruments or otherwise engage in transactions that are
designed to or have the effect of “hedging” or offsetting any decrease in
the market value of equity securities that such persons receive from the
company as compensation or that they otherwise hold, directly or
indirectly.
While no specific hedging policy is required, under the proposed rules, all
domestic public companies would be required to:
 Specify the categories of hedging transactions it permits and
prohibits;
 Describe the details and process involving any permitted hedging
transactions, including whether such transactions must be
preapproved and whether a holding period or stock ownership
guidelines apply before hedging will be permitted; and
 Disclose any permissions or prohibitions that specially apply to any
of its employees or directors, but not to others.
Unknown No. This is
notable
because
currently
emerging
growth
companies
(“EGCs”)
and SRCs
are not
otherwise
required to
provide any
CD&A
hedging
policy
disclosure
under Item
402(b) of
Reg. S-K.
Executive
Compensation
Clawback Policy –
Proposed Rules3
Proposed rules would require national securities exchanges to establish
listing standards requiring listed companies to adopt, implement, enforce
and disclose a policy to recover “excess” incentive-based compensation
(i.e., compensation that is granted, earned or vested based wholly or in
part on attainment of a financial reporting measure) received by current
or former Section 16 executive officers during the prior three years to the
extent that such excess compensation was awarded as a result of
material noncompliance with financial reporting requirements that
Unknown No
2
The comment period for these proposed rules expired on April 20, 2015, and the SEC has not extended the comment period or released any new information
regarding when the final rules will be published.
3
The comment period for these proposed rules expired on September 14, 2015, and the SEC has not extended the comment period or released any new
information regarding when the final rules will be published.

Guidance/Rule
(including link)
Period
Exemption
for SRC or
EGC?
resulted in an accounting restatement. The proposed rules would require
public companies to:
 Adopt a clawback policy within 60 days after the new exchange
rules become effective, which must be 90 days after the SEC’s
final rules are published;
 Enforce the clawback policy by recovering the amount of incentive-
based compensation actually paid to current and former executive
officers during the three-year period preceding the year in which
the company is required to restate its financial statements in
excess of what would have been paid had the financial statements
been correct at the time the compensation was received,
irrespective of whether those executive officers engaged in any
misconduct; and
 Disclose the clawback policy as an exhibit to its Form 10-K and
provide disclosures about the policy in its annual proxy or
information statement if and when the recovery policy is triggered.
Companies should review and update incentive plans, award agreements,
and employment agreements and consider modifications to the
compensation committee charter with respect to clawback policy
enforcement.
CEO Pay Ratio
Disclosure – Final
Rules
Final rules require companies to identify their “median” employee and
disclose the following information:
 The median of the annual total compensation of all employees,
excluding the CEO;
 The annual total compensation of the CEO; and
 The ratio of these two totals. The ratio may be disclosed
numerically (e.g. 50 to 1) or narratively (e.g. “the CEO’s annual
total compensation is 50 times that of the median of the annual
total compensation of all employees), but not as a percentage or
fraction of the CEO’s compensation.
Identifying the median employee: Companies have significant flexibility in
identifying the median employee and can use reasonable estimates based
on the company’s facts and circumstances. However, the median
Disclosures
required for
compensatio
n paid for
the
company’s
first full
fiscal year
beginning on
or after
January 1,
2017 (so
generally
Yes – does
not apply to
SRCs or
EGCs. One-
year phase-
in grace
period after
loss of SRC
or EGC
status.

Guidance/Rule
(including link)
Period
Exemption
for SRC or
EGC?
employee must be determined from all “employees,” which includes all
U.S. and non-U.S. full-time, part-time, seasonal and temporary
employees and its consolidated subsidiaries. Independent contractors or
leased workers are excluded from the analysis but only to the extent that
they are employed by and their compensation is determined by an
unaffiliated third party. The date for determining the median employee
must be disclosed and must be within the last three months of the last
completed fiscal year. There are also limited exceptions for non-U.S.
employees relating to data privacy laws and when 5% or less of the total
workforce is non-U.S.-based.
Calculating annual total compensation: The total compensation of the
median employee must be calculated consistent with the requirements for
calculating total compensation for the CEO for purposes of the summary
compensation table under Item 402 of Reg. S-K. The company may use
reasonable estimates, as long as they are consistently applied and
disclosed. Any change in methodology, assumptions, adjustments or
estimates from the prior year must be disclosed if the effects are
significant.
the 2018
proxy,
practically
speaking)
Pay-for-
Performance –
Proposed Rules4
Proposed rules would require companies to disclose the relationship
between executive compensation actually paid and the company’s
financial performance in a table with the following information for the last
five years:
 Executive compensation “actually paid” to the named executive
officers (the “NEOs”) (with separate disclosure for the principal
executive officer and the average for the other NEOs), calculated
based on total compensation as disclosed in the summary
compensation table (the “SCT”), including the vested value of
equity awards vesting during the year (rather than the value at
grant as reported in the SCT);
 Annual Total Shareholder Return (TSR) of the company; and
Pay-for-
performance
table must
include the
required
information
for each of
the five
most
recently
completed
fiscal years,
Yes – does
not apply to
EGCs. SRCs
that are not
EGCs would
have
reduced
disclosure
obligations.
4
The comment period for these proposed rules expired on July 6, 2015, and the SEC has not extended the comment period or released any new information
regarding when the final rules will be published.

Guidance/Rule
(including link)
Period
Exemption
for SRC or
EGC?
 Annual Peer Group TSR for the company’s peer group, using either
the peer group selected for the company’s stock performance
graph or as identified in the company’s CD&A disclosure.
Calculation of executive compensation “actually paid:” Under the
proposed rules, “executive compensation actually paid” would be
calculated as follows, but may be supplemented with additional measures
of compensation (such as “realized pay”) as long as such additional
disclosure is not misleading or presented more prominently than the
following required disclosure:
1. Total compensation as reported in the summary compensation
table;
2. Minus the change in the actuarial present value of all defined
benefit and pension plans;
3. Plus the actuarially determined service cost for services rendered
by the executive during the applicable year, in accordance with
FASB ASC Topic 715;
4. Minus the fair value of stock and option awards as of the grant
date; and
5. Plus the aggregate fair value of stock and option awards that
vested during the year as of the vesting date (as determined
under FASB ASC Topic 718), even if options have not been
exercised.
Reduced disclosure for SRCs: SRCs may disclose only three years of
compensation, rather than five, and only two years for the first year of
required disclosure under the proposed phase-in rules. Similarly, SRCs
are not required to disclose peer group TSR or pension-related
information.
which will
occur in
phases:
companies
initially
would only
report three
years of
data and
would
increase
disclosure
each year by
one year,
until five
years of
data is
presented.

Exhibit A
Scaled SRC disclosure requirements under Reg. S-K and Reg. S-X
Regulation S-K
Item Scaled Disclosure Accommodation
101 − Description of Business May satisfy disclosure obligations by describing the development of its business during
the last three years rather than five years. Business development description
requirements are less detailed than disclosure requirements for non- smaller reporting
companies.
201 − Market Price of and
Dividends on the Registrant’s
Common Equity and Related
Stockholder Matters
Stock performance graph not required.
301 – Selected Financial Data Not required.
302 – Supplementary Financial
Information
Not required.
303 – Management’s Discussion and
Analysis of Financial Condition and
Results of Operations (MD&A)
Two-year MD&A comparison rather than three-year comparison.
Two year discussion of impact of inflation and changes in prices rather than three
years.
Tabular disclosure of contractual obligations not required.
305 – Quantitative and Qualitative
Disclosures About Market Risk
Not required.

Regulation S-K
Item Scaled Disclosure Accommodation
402 – Executive Compensation Three named executive officers rather than five.
Two years of summary compensation table information rather than three. Not
required:
• Compensation discussion and analysis.
• Grants of plan-based awards table.
• Option exercises and stock vested table.
• Pension benefits table.
• Nonqualified deferred compensation table.
• Disclosure of compensation policies and practices related to risk
management.
• Pay ratio disclosure.
404 – Transactions With Related
Persons, Promoters and Certain
Control Persons5
Description of policies/procedures for the review, approval or ratification of related
party transactions not required.
407 – Corporate Governance Audit committee financial expert disclosure not required in first year.
Compensation committee interlocks and insider participation disclosure not
required.
Compensation committee report not required.
503 – Prospectus Summary, Risk
Factors and Ratio of Earnings to
Fixed Charges
No ratio of earnings to fixed charges disclosure required.
No risk factors required in Exchange Act filings.
601 – Exhibits Statements regarding computation of ratios not required.
5
The SEC identified Item 404 of Reg. S-K as the only instance in Reg. S-K in which the disclosure requirements applicable to SRCs could be more stringent.
Item 404 also contains the following expanded disclosure requirements applicable to SRCs: (1) rather than a flat $120,000 disclosure threshold, the threshold is
the lesser of $120,000 or 1% of total assets, (2) disclosures are required about parents and underwriting discounts and commissions where a related person is a
principal underwriter or a controlling person or member of a firm that was or is going to be a principal underwriter, and (3) an additional year of Item 404
disclosure is required in filings other than registration statements.

Regulation S-X
Rule Scaled Disclosure
8-02 – Annual Financial Statements Two years of income statements rather than three years.
Two years of cash flow statements rather than three years.
Two years of changes in stockholders’ equity statements rather than three years.
8-03 – Interim Financial Statements Permits certain historical financial data in lieu of separate historical financial
statements of equity investees.
8-04 – Financial Statements of
Businesses Acquired or to Be
Acquired
Maximum of two years of acquiree financial statements rather than three years.
8-05 – Pro forma Financial
Information
Fewer circumstances under which pro forma financial statements are required.
8-06 – Real Estate Operations
Acquired or to Be Acquired
Maximum of two years of financial statements for acquisition of properties from related
parties rather than three years.
8-08 – Age of Financial Statements Less stringent age of financial statements requirements.

Handy chart of the day: Recent SEC guidance and rules

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