1.4 To Whom Do the Rules Apply?

1.4.1 Domestic Issuers

The Rules apply to a registrant other than a registered investment company. Item 10(e) applies to domestic (U.S.) registrants that include non-GAAP financial measures “in a filing with the Commission.” In accordance with the Release, Regulation G applies “whenever a company publicly discloses or releases material information that includes a non-GAAP financial measure.”

1.4.2 Voluntary Filers

The SEC addressed the Rules’ application to voluntary filers in C&DI Question 107.01.

C&DIs — Non-GAAP Financial Measures

Question 107.01

Question: Section 15(d) of the Exchange Act suspends automatically its application to any company that would be subject to the filing requirements of that section where, if other conditions are met, on the first day of the company’s fiscal year it has fewer than 300 holders of record of the class of securities that created the Section 15(d) obligation. This suspension, which relates to the fiscal year in which the fewer than 300 record holders determination is made on the first day thereof, is automatic and does not require any filing with the Commission. The Commission adopted Rule 15d-6 under the Exchange Act to require the filing of a Form 15 as a notice of the suspension of a company’s reporting obligation under Section 15(d). Such a filing, however, is not a condition to the suspension. A number of companies whose Section 15(d) reporting obligation is suspended automatically by the statute choose not to file the notice required by Rule 15d-6 and continue to file Exchange Act reports as though they continue to be required. Must a company whose reporting obligation is suspended automatically by Section 15(d) but continues to file periodic reports as though it were required to file periodic reports comply with Regulation G and the requirements of Item 10(e) of Regulation S-K?

Answer: Yes. Regulation S-K relates to filings with the Commission. Accordingly, a company that is making filings as described in this question must comply with Regulation S-K or Form 20-F, as applicable, in its filings.

As to other public communications, any company “that has a class of securities registered under Section 12 of the Securities Exchange Act of 1934, or is required to file reports under Section 15(d) of the Securities Exchange Act of 1934” must comply with Regulation G. The application of this standard to those companies that no longer are “required” to report under Section 15(d) but choose to continue to report presents a difficult dilemma, as those companies technically are not subject to Regulation G but their continued filing is intended to and does give the appearance that they are a public company whose disclosure is subject to the Commission’s regulations. It is reasonable that this appearance would cause shareholders and other market participants to expect and rely on a company’s required compliance with the requirements of the federal securities laws applicable to companies reporting under Section 15(d). Accordingly, while Regulation G technically does not apply to a company such as the one described in this question, the failure of such a company to comply with all requirements (including Regulation G) applicable to a Section 15(d)-reporting company can raise significant issues regarding that company’s compliance with the anti-fraud provisions of the federal securities laws. [Jan. 11, 2010]

In short, Item 10(e) applies to a “voluntary filer” (e.g., a company that continues to file periodic reports even though its periodic reporting obligations under the Exchange Act are suspended). Regulation G’s guidance on other public communications does not technically apply to a voluntary filer; however, the SEC staff noted that “the failure of such a company to comply with all requirements (including Regulation G) applicable to a Section 15(d)-reporting company can raise significant issues regarding that company’s compliance with the anti-fraud provisions of the federal securities laws.”

1.4.3 Foreign Private Issuers

At the 2016 AICPA Conference, the SEC staff reminded registrants that the Rules also apply to foreign private issuers (FPIs). While FPIs are subject to Regulation G (other than in the limited exceptions outlined below) and to Item 10(e) if they file Form 20-F or registration statements under the Securities Act of 1933 (the "Securities Act"), the Rules do not apply to filers that use Form 40-F under the Multi-Jurisdictional Disclosure System (which applies to eligible Canadian issuers).

Regulation G states that its requirements do not apply to FPIs that include non-GAAP measures in publicly disclosed information when all three of the following three conditions are met:

“The securities of the [FPI] are listed or quoted on a securities exchange or inter-dealer quotation system outside the United States” (e.g., the London Stock Exchange Group).
“The non-GAAP financial measure is not derived from or based on a measure calculated and presented in accordance with [U.S. GAAP]” (e.g., IFRS® information).
“The disclosure is made by or on behalf of the [FPI] outside the United States, or is included in a written communication that is released by or on behalf of the [FPI] outside the United States.”

In addition, the Release specifies that “[t]hese conditions focus on whether the financial measure relates to U.S. GAAP and whether the disclosure is made . . . outside of the United States.” Moreover, the conditions “take into account the interests of [FPIs] . . . in communicating globally, including in their home markets.”

Regulation G further states that the exception for FPIs applies even under any of the following circumstances:

“A written communication is released in the United States as well as outside the United States, so long as the communication is released in the United States contemporaneously with or after the release outside the United States and is not otherwise targeted at persons located in the United States.”
“Foreign journalists, U.S. journalists or other third parties have access to the information.”
“The information appears on one or more web sites maintained by the [FPI], so long as the web sites, taken together, are not available exclusively to, or targeted at, persons located in the United States.”
The information is included in a Form 6-K after the “disclosure or release of the information outside the United States.”

For more information about the applicability of the Rules to FPIs, see Section 8140 of the FRM and Section 106 of the C&DIs. See also Section 2.1.2 of this Roadmap.

Confidential and Proprietary — for Use Solely by Authorized Personnel

This SEC Reporting Interpretations manual provides comprehensive guidance; however, the manual does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.