On March 13, the Securities and Exchange Commission charged eight officers, directors and major shareholders for failing to update material changes in their stock ownership disclosures on Schedule 13D in connection with certain “going private” transactions. The respondents, who neither admitted nor denied the allegations, settled the proceedings by paying to the SEC fines totaling more than $250,000.
Under Section 13(d) of the Securities Exchange Act of 1934 (the Act), certain beneficial owners holding more than 5 percent of a public company’s stock are required to promptly file Schedule 13D amendments following material changes in any previously reported information, including plans or proposals for going private transactions. The SEC’s charges related to outdated disclosures filed by the respondents, who took such steps as determining the form of the going private transaction, obtaining waivers from preferred shareholders and assisting with shareholder vote projections. When viewed together, the SEC argued, such steps resulted in a material change from the disclosures in the respondents’ respective Schedule 13D filings.
“Investors are entitled to current and accurate information about the plans of large shareholders and company insiders,” said Andrew J. Ceresney, director of the Division of Enforcement. “Stale, generic disclosures that simply reserve the right to engage in certain corporate transactions do not suffice when there are material changes to those plans, including actions to take a company private.”
Additionally, the SEC charged some of the respondents for failing to timely report their transactions involving company securities under Section 16 of the Act. In some instances, respondents disclosed their transactions in company securities months or even years after the fact, and not within two business days, as required by the Act.
Click here for the SEC press release.