The idea is to give companies a more detailed prescription of what the SEC wants in the statistical data underlying the MD&A, meaning the “set of critical variables which presents the pulse of the business.” The significant takeaway from this new guidance is the SEC’s reminder of “the need to include such further material information, if any, as may be necessary in order to make the presentation of the metric, in light of the circumstances under which it is presented, not misleading.”

Ashley Ebersole, a partner at the law firm of Bryan Cave Leighton Paisner in Washington, D.C., says while there have been several enforcement actions in the recent past focused on misstatements, there isn’t an obvious catalyst for why the SEC is issuing this new guidance now. “But investor interest in ESG [environmental, social, and governance] metrics has been rising and separately the Commission has sought ways to standardize issuers’ reporting of performance indicators to improve their consistency and usefulness to investors, so the guidance may be an outgrowth of a few parallel trends,” he says.

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