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Valeant – the new poster child for impermissible non- GAAP reporting. Last week the SEC informed Valeant Pharmaceuticals that their use of certain non-GAAP financial measures was “potentially misleading.” The company strips out acquisition-related costs from many traditional measures, despite having completed more than 23 acquisitions in the past three years. The salvo against Valeant is the latest demonstration that the SEC means business when it comes to reining in the use of non-GAAP metrics.

This sort of behavior isn’t rare, and has become much more commonplace since 2006, when the SEC lifted its effective ban on presenting non-GAAP metrics. It is the underlying reason for the SEC’s recent crackdown on the practice, when it issued new Compliance & Disclosure Interpretations as part of its effort to restrict the current liberal use of them. A Factset study showed that nearly 90% of S&P 500 companies in 2015 used non-GAAP metrics, which materially improved financial comparisons. William Blair analyst Nick Heymann issued a study showing that the spread between GAAP earnings per share and non-GAAP earnings per share has widened significantly for industrial companies in just a few years. Non-GAAP EPS was higher than GAAP EPS by an average of 25% in 2015, compared with just 6% in 2013.

New Legislation to Regulate Proxy Advisory Firms: Did you know there is a rule about to come out of the House (HR 5311) that will require more oversight of proxy advisors

– Glass Lewis and ISS? The proxy advisory firms argue that their recommendations affect less than 20% of the overall shares voted in proxy contests. The companies pressuring for the legislation counter that they hold an unwieldy amount of influence in the corporate governance process and need to be watched more closely. The companies also want to be able to comment or fact check recommendations before they are released publicly. Pundits believe it will be approved in the House in short order and move on to the Senate to debate. It’s bi-partisan and supported by very popular senators from Wisconsin and Delaware.

And, under the category, only in New York… The SEC has just reminded us (as if we had to be), don’t trade plumbing work for insider information. A former investment banker is now in hot water, as he was just arrested for providing a pipeline of information on pending mergers and acquisitions, before they became public knowledge. The plumber, who pleaded guilty to the charges and is cooperating with authorities, used the leaks to make a handy profit and “thanked” the banker in part with a full bathroom remodel. Of course, it all went down the drain, and now the investment banker could be going up the river.

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