1. Michael Yecies – Resource America, Inc.
SEC UPDATE
Alex Bourelly – Baker Botts John Penn – RBC Capital Markets, LLC
Adriana Mitchell – Jack Cooper Holdings Corp. John Rudy – Deere & Company
Michael Yecies – Resource America, Inc.

2. SHAREHOLDER ACTIVISM Shareholder Proposals Board Seats
Activism Trends
Selected experiences and strategies
Shareholder Proposals
Board Seats
Strategic Transactions
Beneficial Ownership Disclosure Developments:
SEC Modernization Project
Dodd-Frank
Brokaw Act – March 2016
SEC – July 14, 2016 C&DI relating to the Hart-Scott Rodino Act passive investment exemption and DOJ July 12, 2016 Value Act settlement.

3. WHISTLEBLOWING SEC Enforcement:
Settlement relating to the impermissibility of severance agreements prohibiting SEC whistleblower award applications (August 16,
Settlement relating to the impermissibility of severance agreements requiring a waiver of monetary recovery in the event of an SEC or other federal agency whistleblower application (August 10,

4. NON-GAAP MEASUREMENTS – MIND THE (NON)GAAP

5. RECENT GUIDANCE BY THE SEC
Recent remarks by the SEC have given a number of warnings about the SEC’s renewed focus on non-GAAP measures presentation.
“This area [of Non-GAAP measures] deserves close attention, both to make sure that [its] current rules are being followed and to ask whether they are sufficiently robust in light of current market practices.” SEC Chair Mary Jo White, AICPA national conference, December 2015.
“For lack of a better way to say it, we are going to crack down… The pendulum has swung.” Mark Kronforst, Chief Accountant of Division of Corporation Finance, Baruch Collage Financial Reporting Conference, May 2016.
“This next quarter will be a great opportunity for companies to self-correct.” Mark Kronforst, Chief Accountant of Division of Corporation Finance, PCAOB’s Standing Advisory Group Meeting, May 2016

6. MAY 2016 C&DIs issued by SEC
Reflect a sharpened focus on the use and presentation of non-GAAP financial measures.
The May 17, 2016 C&DIs begin by reminding us that “certain adjustments, although not explicitly prohibited, [can] result in a non-GAAP measure that is misleading” and violate Rule 100(b) of Regulation G. (Question ).
The C&DIs then proceed to give examples of non-GAAP measures that may be misleading.

7. A NON-GAAP MEASURE CAN BE MISLEADING IF:
Excludes normal, recurring cash operating expenses necessary to operate a registrant’s business could be misleading. (Question )
Inconsistent between periods (Question ).
Excludes charges, but does not exclude any gains (Question ).
Adjusts revenue (e.g., accelerating revenue for a subscription business) (Question 100.4)
“[I]f you present adjusted revenue, you will likely get a comment.” Wesley Bricker, SEC deputy chief accountant.

8. GUIDANCE ON EQUAL OR GREATER PROMINENCE
Equal or greater prominence is required in documents filed with the SEC and also items furnished with the SEC under Item 2.02 of Form 8-K. BUT: Non-GAAP measures in investor presentations not filed or furnished with SEC and roadshows are still subject to “not misleading” requirement.

9. WHEN IS NON-GAAP MEASURE DEEMED AS MORE “PROMINENT”?
Income Statements: Presenting a full income statement of non-GAAP measures or presenting a full non-GAAP income statement when reconciling non-GAAP measures to the most directly comparable GAAP measures.
Headlines: Omitting comparable GAAP measures from an earnings release headline or caption that includes non-GAAP measures.
Font Style: Emphasizing the non-GAAP measure in bold, larger font, etc.

10. WHEN IS NON-GAAP MEASURE DEEMED AS MORE “PROMINENT”? (CONT’D)
Location: non-GAAP measure precedes the most directly comparable GAAP measure (including in an earnings release headline or caption).
Power Adjectives: describing the non-GAAP measure as a “record performance” or “exceptional” without an equally prominent characterization of the comparable GAAP measure.
Tables: Providing tabular disclosure of non-GAAP financial measures without preceding it with an equally prominent tabular disclosure of the comparable GAAP measures or including the GAAP measures in the same table.
Discussion & Analysis: Providing discussion and analysis of a non-GAAP measure without a similar discussion and analysis of the comparable GAAP measure in a location with equal or greater prominence.

11. TAKE-AWAYS IN LIGHT OF “NEW NON-GAAP REGIME”
Educate your audit committee and financial staff on the SEC’s recent guidance.
Work with your audit committee and financial staff to review/establish guidelines for the use of non-GAAP financial measures, including the types of exclusions permitted. Review these guidelines annually (or more frequently if circumstances warrant) and update to reflect reasonable proposals for additional types of adjustments.
Reevaluate why you use the non-GAAP financial measure’s usefulness
Avoid boilerplate explanations
Conduct a peer analysis.

12. SEC DODD-FRANK PROXY RULES UPDATE
CEO Pay Ratio Rule – Final (effective for full years beginning on and after Jan. 1, 2017 – therefore will need to be disclosed in proxy statement for 2018 annual meeting).
EGCs are exempt.
Companies required to disclose:
The median of the annual total compensation of all employees, except the CEO;
The annual total compensation of the CEO;
The ratio of those two amounts.

13. SEC DODD-FRANK PROXY RULES UPDATE (CONT’D)
Pay for Performance – Proposed; unlikely to be effective before 2017 fiscal year proxy filed in 2017.
EGCs are exempt.
Companies required to disclose:
Tabular disclosure covering up to 5 years of compensation “actually paid” to the CEO and an average of the compensation “actually paid’ to the other NEOs.
Relationship between (1) compensation “actually paid” and the registrant’s total shareholder return (“TSR”) on an annual basis and (2) the registrant’s TSR and a peer group return on an annual basis.

14. SEC DODD-FRANK PROXY RULES UPDATE (CONT’D)
Executive Clawbacks – Proposed
EGCs NOT exempt.
Would apply to current and former executive officers.
Clawback Trigger Event: A Correction of Errors: In the event that the issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer with any financial reporting requirement under the securities laws.

15. FAST Act Updates New Resale Exemption: Section 4(a)(7).
Reduced 15 Days Waiting Period for EGCs Prior to Initial Public Offering Roadshow.
Form 10-K Summary Page – June 1, 2016 interim final rule adopted.

16. Volcker Rule Conformance Date – July 21, 2015 General Requirements
Selected Exemptions/Exclusions:
Proprietary Provisions
Underwriting
Market Making
Covered Funds
Covered Bonds

17. QUESTIONS?