After years of little enforcement action, the Securities and Exchange Commission (“SEC”) issued a press releaseyesterday announcing charges against 28 officers, directors, or major shareholders for violating federal securities laws requiring prompt reporting of information regarding their holdings and transactions in company stock. Six publicly traded companies were also charged for contributing to filing failures by insiders or failing to report their insiders’ filing delinquencies. Of the 34 individuals and companies named in the SEC’s orders, 33 agreed to settle the charges and pay financial penalties totaling $2.6 million.
Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, stated, “using quantitative analytics, we identified individuals and companies with especially high rates of filing deficiencies, and we are bringing these actions together to send a clear message about the importance of these filing provisions. 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.”
Two types of ownership reports allow investors to incorporate insider holdings and transactions into their evaluation of a company’s future prospects: Form 4 and Schedule 13D and 13G. Form 4 is used by corporate officers, directors, and certain beneficial owners of more than 10% of a registered class of a company’s stock to report their transactions in company stock within two business days. Schedule 13D and 13G are reports used by beneficial owners of more than 5% of a registered class of a company’s stock to report holdings or intentions with respect to the company. These reporting requirements apply regardless of profits or a person’s reasons for acquiring company stock or engaging in transactions, and those who fail to comply with such requirements risk SEC enforcement action.