The Securities and Exchange Commission recently brought its
first enforcement action under Regulation G. [SafeNet, Inc. Litig. Rel. No. 21290].
Although the SEC's complaint alleges multiple intentional
violations of the federal securities laws, including improper
accounting and backdating of options, a review of the Regulation G
elements of the action provides useful guidance for public
companies that regularly use non-GAAP financial measures when
discussing their operating results.
The SEC complaint noted that SafeNet issued earnings guidance on
both a GAAP and non-GAAP basis. Regulation G applies whenever a
reporting company discloses publicly any material information that
includes a non-GAAP financial measure, which is a measure of
financial performance or position that is not calculated in
accordance with generally accepted accounting principles in the
United States (GAAP) and that makes adjustments to the most
directly comparable GAAP financial measure.
