SEC Explains Regulation G Exemption For M&A Forecasts

Yesterday, the Staff of the U.S. Securities and Exchange Commission (SEC) elaborated on existing rules and interpretations to make clear that, in the context of an M&A transaction, Regulation G does not apply to financial projections or forecasts that are provided by a company to its financial advisors to use in rendering a fairness opinion and then disclosed in summary form to stockholders in the related proxy or tender offer materials. In light of the significant rise in deal-related lawsuits that allege, as their central argument, that failure to provide a GAAP reconciliation for the non-GAAP information included in those summary forecasts is a violation of the federal securities laws, the SEC Staff's clarification should have a significant effect on numerous pending suits and on the ability of the plaintiff's bar to bring such claims in the future.