SEC Levies $2.6 Million in Penalties for Beneficial Holdings Reporting Failures
The SEC has announced settled charges totaling $2.6 Million in aggregate penalties against 33 firms, corporate officers, directors, and shareholders for violations of beneficial holdings reporting requirements. The SEC charged 13 corporate officers and directors including CEOs, CFOs, and a General Counsel. The SEC also charged five shareholders, 10 investment firms, and six publicly traded companies for contributing to failures. The SEC alleges failures to file Form 4 (requiring corporate officers, directors and 10% beneficial shareholders to report their individual holdings) and Schedules 13D and 13G (requiring holdings reports by 5% beneficial owners). The SEC states that the actions stem from an “SEC enforcement initiative” that used “quantitative analytics” to identify individuals and companies with “especially high rates of filing deficiencies.” Andrew Ceresney, Director of the SEC’s Division of Enforcement warned, “Officers, directors, major shareholders, and issuers should all take note: inadvertence is no defense to filing violations, and we will vigorously police these sorts of violations through streamlined actions.” Andrew M. Calamari, Director of the SEC’s New York Regional Office, added, “The reporting requirements in the federal securities laws are not mere suggestions, they are legal obligations that must be obeyed. Those who fail to do so run the risk of facing an SEC enforcement action.”
OUR TAKE: The SEC has previously stated that it will prosecute technical violations of the securities laws as a way to head off larger frauds. Firms need to retain competent regulatory professionals who know the rules.