Tag: key performance indicators

Cookie-jar KPIs lead to Securities Act violation

Last week, the SEC charged BMW and subsidiaries with Securities Act violations for disclosing inaccurate and misleading information about the company’s retail sales volume in the U.S.—not as sales in its financial statements, but rather as key performance indicators in its offering memoranda to prospective investors for bond offerings that raised approximately $18 billion. Because of BMW’s “substantial cooperation during the investigation, notwithstanding the challenges presented by the global COVID-19 pandemic,” according to the Order, the SEC determined to impose a reduced penalty of only $18 million.

Corp Fin issues Disclosure Guidance: Topic No. 9 Coronavirus (COVID-19)

Today, the staff of Corp Fin issued Disclosure Guidance Topic No. 9, which offers the staff’s views regarding disclosure considerations, trading on material inside information and reporting financial results in the context of COVID-19 and related uncertainties. The guidance includes a valuable series of questions designed to help companies assess, and to stimulate effective disclosure regarding, the impact of the coronavirus.  As always these days, the guidance makes clear that it represents only the views of the staff, is not binding and has no legal force or effect.

Cooley Alert: SEC Proposes to Modernize MD&A and Other Financial Disclosures

Check out our new Cooley Alert: SEC Proposes to Modernize MD&A and Other Financial Disclosures.  It’s a thrill from beginning to end and much more fun than watching the market these days. 

SEC charges company for failure to disclose material trends

The SEC has just settled an action against Diageo PLC, a producer of liquor, wine and beer, for failure to disclose known trends and uncertainties.  Diageo’s omission resulted in materially misleading disclosures regarding its financial results and material inflation of key performance indicators—organic net sales growth and organic operating profit growth.  It’s worth noting that the SEC has not been reluctant to take enforcement action against companies that have misled investors by inflating KPIs, such as subscriber counts, revenue-per-subscriber, number of vehicles sold monthly, net new customers added, backlog and now organic net sales growth and organic operating profit growth. These types of metrics—typically outside of the financial statements—are metrics on which investors and analysts often rely to assess performance, and companies have been held to account if their presentations are materially inaccurate or misleading or the related controls are inadequate.

SEC issues guidance on disclosure of key performance indicators

On Thursday, in addition to voting to issue a new rule proposal regarding changes to MD&A and other financial disclosure requirements (see this PubCo post), the SEC also issued new companion guidance on the disclosure of key performance indicators and other metrics in MD&A.  There has been an increase in investor interest in disclosure of KPIs and similar metrics, as part of MD&A and especially outside of MD&A, for example, in connection with sustainability reporting.  (See this PubCo post.) Although the SEC’s guidance applies specifically in the context of MD&A, companies may want to take the guidance into account in other contexts as well.