SEC Actions Target Companies for Failure to File 8-Ks

On November 5, 2014, the SEC announced enforcement actions against 10 public companies that failed to make required disclosures about unregistered issuances of shares that resulted in the dilution of their stock.

The SEC found that each of the 10 companies failed to file required Form 8-Ks.  Three of those companies also failed to use accurate numbers when reporting on the dilution of their common stock in quarterly or annual reports. All 10 of the companies agreed to settle the SEC’s charges and each paid a penalty ranging from $25,000 to $50,000.  Smaller reporting companies are required to file a Form 8-K to inform investors when shares of common stock are sold in unregistered transactions and constitute at least five percent of the total stock held by their shareholders.  Companies also must report when they have entered into a financing agreement not made in the ordinary course of business.

“Public issuers must ensure that their SEC filings contain all required information so that investors can base decisions on current and accurate information,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “These enforcement actions reinforce the ongoing need for full disclosure to shareholders concerning an issuer’s entry into highly dilutive financing agreements.”

As illustrated by the SEC’s sanctions against these 10 companies, it is critical that small issuers comply with all reporting requirements.  If you need help with reporting or have questions about compliance, please contact us. The securities lawyers at Kruse Landa Maycock and Ricks have been assisting small public companies for more than 40 years. Please contact us if you have questions about compliance procedures or other securities-related matters.

Kevin Timken is a member of Kruse Landa Maycock & Ricks specializing in public company and broker-dealer compliance.