The SEC recently identified a new SEC enforcement initiative which “focuses on two types of ownership reports that give investors the opportunity to evaluate whether the holdings and transactions of company insiders could be indicative of the company’s future prospects.” The 2 ownership reports are Form 4, which is required of company insiders, officers, directors, and certain others when they buy or sell company stock, and Schedule 13D & 13G, which is required of beneficial owners of more than 5% of a registered class of company stock to report their holdings or intentions re: the company.

The Division of Enforcement brought charges against 28 officers, including some that were responsible for SEC Reporting, directors, or major shareholders for violating federal securities laws requiring them to promptly report information about their holdings and transactions in company stock. Six public companies were charged for contributing to filing failures by insiders or failing to report their insider delinquencies. The SEC Enforcement staff used “quantitative data sources and ranking algorithms [DERA at work again] to identify these insiders as repeatedly filing late”, some by years. The orders that were issued reinforced that even inadvertent failures to file are still violations of the rules. The initiative resulted in fines totaling $2.6 million from 33 individuals and companies.

While the 5% test can be challenging for some, the misses in filing Form 4s are surprising, as the rules are fairly clear, and take 10 minutes at the most, to digest, based on our experience in our SEC Reporting Skills Workshop. However, whether to check the 10-K cover page box for delinquent filer of Forms 3, 4, or 5 befuddles many; a hint – if everyone did what they were supposed to and filed as they should, the box is checked.

See the SEC’s Press Release at: http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370542904678

As always, we would love to hear your comments!