Days Late And $2.6 Million Short: The Failure To File Timely Ownership Reports Is Costly

On Wednesday, the SEC announced that it had levied charges against (i) 28 officers, directors and major shareholders of public companies for failing to file timely reports regarding their holdings and transactions in their respective companies' equity securities and (ii) six public companies for contributing to filing failures by their insiders or failing to report their insiders' filing delinquencies. Emphasizing the importance of filing ownership reports in a timely manner, Andrew J. Ceresney, Director of the SEC's Division of Enforcement, stated that "[o]fficers, 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 head of the SEC's New York Regional Office conducting the investigation noted that "[t]he 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."

A copy of the press release announcing the charges can be found here.

Who Are "Insiders" and What Are They Required to File?

Federal securities laws generally require directors, key officers and certain beneficial owners (collectively referred to as "Insiders") to file ownership reports, including Forms 3, 4 and 5 and Schedules 13D and 13G, regarding their positions in a company's equity securities at certain specified times, including upon the closing of certain transactions in a company's equity securities. Directors, key officers and owners of more than 10% of a public company's outstanding equity securities are required to make Form 3, 4 and 5 filings. Persons or groups who directly or indirectly acquire or have ownership of more than 5% of any class of a company's equity securities are required to make Schedule 13D and 13G filings. These ownership reports seek to (i) allow investors to evaluate whether the holdings and transactions of Insiders are indicative of the company's future prospects, (ii) discourage Insiders from profiting by trading on the basis of superior information that they may have obtained through their position with the company and (iii) require beneficial owners of significant positions in a public company's securities to disclose their intent, if any, to influence the company with respect to their ownership of equity securities.

How Did the SEC Identify these...

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