Last week, the SEC brought its first action for a violation of the 1934 Act Section 13(k) prohibition of personal loans to executive officers. The administrative proceeding was brought against the CEO and CFO of Stelmar Shipping, a foreign private issuer. The issuer had claimed that the extensions were mere “advances” and not loans.
In the Fall of 2003, Stelmar’s CEO and CFO authorized interest-free loans from the issuer to themselves – note they were not approved by the board. During the course of the 2003 audit, the outside auditors learned about the loans and concluded that they were prohibited by Section 13(k). In March 2004, Stelmar reported the violation on a Form 6-K containing its proxy. (Interestingly, the issuer also imposed a financial fine of $50,000 and $30,000 on the CEO and CFO, respectively.) Stelmar was acquired early this year, but the CEO and CFO remained employed by Stelmar until (close to) the time of the acquisition.
Ultimately, the CEO and CFO agreed to a cease-and-desist order with the SEC.
PCAOB Member Gradison Named Acting Chairman
On Friday, the SEC named PCAOB Board Member Bill Gradison as Acting Chairman of the PCOAB. At the inception of the PCAOB in 2002, Gradison was named to a two-year term and was reappointed in 2004 to an additional five-year term.
Former PCAOB Chairman William McDonough’s resignation was effective as of last Wednesday, November 30th.
DealLawyer.com’s Webcast Transcript Now Up!
The transcript for the DealLawyer.com’s webcast, “The Latest on Special Negotiating Committees,” is now available.