TheCorporateCounsel.net

Yesterday, the SEC announced settled enforcement proceedings against 23 entities and individuals arising out of late beneficial ownership reports (and yes, there are some very big names here). Two public companies were also charged for contributing to their insiders’ violations and failing to disclose the delinquent filings as required. Here’s an excerpt from the SEC’s press release announcing the proceedings:

The charges announced today stem from SEC enforcement initiatives focused on Schedules 13D and 13G reports and Forms 3, 4, and 5 that certain corporate insiders are required to file. Schedules 13D and 13G provide information about the holdings and intentions of investors who beneficially own more than five percent of any registered voting class of public company stock. Forms 3, 4, and 5 are reports used to provide information about public company stock transactions by corporate officers, directors, or certain investors who beneficially own more than 10 percent of the stock. These reporting requirements apply irrespective of whether the trades were profitable and regardless of a person’s reasons for the transactions. SEC staff used data analytics to identify the charged individuals and entities as filing required reports late.

Each of the parties consented, on a neither admit nor deny basis, to an order to cease and desist from future violations and to pay civil penalties. Those penalties ranged from $10,000 to $200,000 for the individuals involved in the proceedings and from $40,000 to $750,000 for the entities involved. The two public companies targeted by the SEC each paid a civil penalty of $200,000.

Earlier this year, Corp Fin Director Erik Gerding announced that compliance with beneficial ownership reporting requirements was one of the priorities for this year’s disclosure review program, and we’ve blogged about Staff comments targeting the timeliness of beneficial ownership filings. We’ve also seen at least one high-profile 13D enforcement proceeding prior to those announced yesterday. With that background, the SEC’s decision to conduct an enforcement sweep probably shouldn’t come as a surprise to anyone.

– John Jenkins