SEC Targets Insiders for Failure to File Reports

 A recent enforcement initiative by the SEC focusing on the filing of ownership reports has resulted in charges being filed against 28 officers, directors or major shareholders and six publicly traded companies for violating federal securities laws. The public companies were charged with contributing to filing failures by insiders or failing to report their insiders’ filing delinquencies. Thirty-three of the 34 individuals and companies charged settled with the SEC and agreed to pay fines totaling $2.6 million. The SEC’s actions should remind all public companies about the importance of reviewing policies and procedures concerning these disclosures, and revising them as necessary, to ensure that all filing obligations are met.

Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, stated that the SEC is “bringing these actions together to send a clear message about the importance of these filing provisions.” He further stated that, “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.”

The charges focused on two types of ownership reports designed to assist investors in evaluating whether holdings and transactions of company insiders could be indicative of the company’s future prospects. Form 4, Statement of Changes in Beneficial Ownership, is used for officers, directors and certain beneficial owners to report transactions in company stock within two business days of the transaction. Schedules 13D and 13G are reports used by beneficial owners to report holdings or intentions respecting the company. “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,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.

These enforcement actions are an important reminder to individuals and public companies about the consequences of failing to comply with the disclosure requirements under Sections 16(a), 13(d) and 13(g) of the Securities and Exchange Act. It is critical for public companies to review their policies and procedures to ensure that they are compliant with the rules governing the required disclosures. The securities lawyers at Kruse Landa Maycock and Ricks been assisting public companies with SEC reporting and preparing, reviewing, and updating compliance policies and procedures since 1970. If you have questions about your reporting obligations or other SEC issues, we would be happy to assist you.

Kevin Timken is a member of Kruse Landa Maycock & Ricks specializing in SEC reporting and compliance. Please call him at 801-531-7090, or email

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