The SEC recently announced it had charged 28 officers,  directors and major shareholders for failing to timely report  their holdings and transactions in shares of public  companies. Six public companies were also charged for  contributing to insiders’ filing failures or for failing to report  the insiders’ late or missed filings. Ten of the major  shareholders charged were investment firms that failed to  report their beneficial ownership of shares in public  companies. Some of the filings were delayed by weeks,  months or, in some cases, years. All cases except one have  been settled with the SEC, with sanctions totaling $2.6  million.

Certain shareholders are required to file ownership  reports based on their holdings and transactions. A  company’s officers, directors and shareholders owning 10 percent or more of a company’s shares are required by  Section 16 of the Securities Exchange Act (Act) to file Form  3 to report their initial holdings within 10 business days of  becoming an officer, director or 10 percent shareholder.  Thereafter, such shareholders are required to file Form 4  to report their transactions in shares of the company  within two business days. 

Shareholders who own 5 percent or more of a class of a  company’s shares are required by Section 13 of the Act to  report their holdings and any intentions they may have with  respect to the company on Schedule 13D or Schedule 13G  within 10 days of acquiring at least 5 percent of a class of  shares. Material changes to Schedule 13D filings, including  the acquisition or disposition of shares equal to 1 percent of  the class of shares, require that an amendment be filed promptly (within one business day). Amendments to  Schedule 13G filings must be made within 45 days after the  calendar year end. However, if the holdings of a  shareholder filing on Schedule 13G exceed 10 percent of  the outstanding shares of a class of shares, the shareholder  must file an amendment within 10 days after the end of the  month in which the acquisition was made. 

Investment advisers should consider the policies and  procedures they have in place to monitor ownership of  equity securities in their portfolios to ensure they can  accurately track their ownership positions in public  company shares and make the appropriate filings in a  timely manner. Shareholders who need to report their  transactions on Form 4 should also be mindful of the  provisions of Section 16(b) of the Act, which disallow profits  made by any combination of purchase and sale of company  shares within a six-month period.