The SEC announced action yesterday against 28 officers, directors, or major shareholders for violating federal securities laws requiring them to promptly report information about their holdings and transactions in company stock. Additionally, six publicly-traded companies were charged for contributing to filing failures related to this chronic procrastibation.
From the SEC release:
The charges stem from an SEC enforcement initiative focusing on two types of ownership reports that give investors the opportunity to evaluate whether the holdings and transactions of company insiders could be indicative of the company’s future prospects. Form 4 is a report that corporate officers, directors, and certain beneficial owners of more than 10 percent of a registered class of a company’s stock must use to report their transactions in company stock within two business days. Schedule 13D and 13G are reports that beneficial owners of more than 5 percent of a registered class of a company’s stock must use to report holdings or intentions with respect to the company. SEC enforcement staff used quantitative data sources and ranking algorithms to identify these insiders as repeatedly filing late. Some filings were delayed by weeks, months, or even years.
Andrew M. Calamari, Director of the SEC’s New York Regional Office, said, “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.”
In response to that last statement, Keith Paul Bishop of California-based law firm Allen Matkins writes:
Apparently, the SEC believes that this principle does not apply to itself. The Dodd-Frank Act is a federal securities law that imposed numerous deadlines on the SEC. These deadlines were not “mere suggestions”, they were legal obligations that the SEC was required to obey. Yet, the SEC did not. For example, the SEC failed to adopt resource extraction rules within the statutorily mandated 270 days. After the SEC missed this deadline by over a year, Oxfam America filed suit to force the SEC to comply. See Waiting for the SEC . . . and Supreme Court Fails To Bite At Bulldog And Oxfam America Sues The SEC. Eventually, the SEC adopted final rules on August 22, 2012 – only 600 days late! Yet, no cease and desist orders were issued and no fines were assessed against the Commissioners.
But the SEC is understaffed! But the budget is too small! BUT, BUT, the SEC is not a public company! THINK OF THE INVESTORS!
The maximum penalty paid by an outed late filer was $100,000, with the lowest coming in at $25,000. 33 of the 34 individuals and companies named in the SEC’s orders agreed to settle the charges and pay financial penalties totaling $2.6 million.
The one holdout appears to be Ligang Wang, vice president of China Shen Zhou Mining & Resources. Wang is alleged by the SEC’s Division of Enforcement to have failed to file – on time or at all – reports of his sales of more than 165,000 shares of company stock with a market value of more than $1 million. The Division of Enforcement will litigate the charges against him in an administrative proceeding before an administrative law judge.
Everyone else is all settled up and likely sufficiently terrified so as to never file late again. Or something.