On Friday, the SEC brought 8 enforcement actions against Schedule 13D filers for failing to amend their Schedules. Here’s a good description from this blog by Steve Quinlivan of Stinson Leonard Street:
It’s well known that Federal securities laws require beneficial owners to promptly file an amendment when there is a material change in the facts previously reported by them on Schedule 13D, commonly referred to as a “beneficial ownership report.” It sounds easy to comply with, but the 13Ds can be on file for years, the obligations can be forgotten and facts can change rapidly in certain circumstances. The SEC has now sent a strong reminder to the world that it takes 13D updating obligations seriously. The SEC charged eight officers, directors, or major shareholders for failing to update their stock ownership disclosures to reflect material changes, including steps to take the companies private. Each of the respondents, without admitting or denying the SEC’s allegations, agreed to settle the proceedings by paying a financial penalty.
The SEC’s orders find that the respondents took steps to advance undisclosed plans to effect going private transactions. Some determined the form of the transaction to take the company private, obtained waivers from preferred shareholders, and assisted with shareholder vote projections, while others informed company management of their intention to privatize the company and formed a consortium of shareholders to participate in the going private transaction. As described in the SEC orders, each respective respondent took a series of significant steps that, when viewed together, resulted in a material change from the disclosures that each had previously made in their Schedule 13D filings. According to the SEC’s orders, some of the respondents also failed to timely report their ownership of securities in the company that was the subject of a going private transaction. In addition, six respondents only disclosed their transactions in company securities months or years after the fact, not within two businesses days, as required for these disclosures by insiders.
Left unanswered is the question of “what can I do before I have to amend my 13D and inform the world?”
These don’t look like broken windows to me, although some will claim they are, but it’s probably more of the SEC’s robo-cop program. How hard is it to identify the universe of going private transactions, who had 13D’s on file and who didn’t amend them. Expect the SEC to continue this approach to pick off more low hanging fruit and send messages in the future.
Corp Fin’s Policy Statement: Reg A & D Waivers
On Friday, Corp Fin issued this policy statement on waivers under Regulation A and D. This was just one day after SEC Chair White delivered this speech in which she stated that charging individuals is a more effective tool to deter future misconduct than withholding waivers. In other words, refusing to grant a waiver should not be used as an enforcement tool. She also supported the Staff’s process by which they review waiver requests – noting that it’s “rigorous.”
Lately, the heated battle among the SEC Commissioners over “bad actor” waivers has resulted in the Commissioners themselves deciding whether to grant a waiver rather than the Staff. Here’s an excerpt from White’s speech that sums up how that looks to the outside world:
Unfortunately, the public discussions about the SEC’s waiver decisions sometimes do not recognize these important distinctions and can take on a political tone that can blur the analysis.
Here’s an excerpt from this blog by Steve Quinlivan that nicely sums up where we go from here: “The policy looks fair on its face. Application is another thing.
Initially I think it will lead to lots of those uncomfortable conversations between client and counsel that say “on the one hand these facts are good” and “on the other hand these facts are not.” Should the SEC continue to publish waiver decisions and enough information to ascertain the reasons therefore, eventually the securities bar will figure it out.”
Transcript: “Conduct of the Annual Meeting”
We have posted the transcript of our recent webcast: “Conduct of the Annual Meeting.”
– Broc Romanek