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| 1 minute read

SEC Charges Insiders and Companies for Reporting Failures

On September 27, 2023, the U.S. Securities and Exchange Commission (SEC) announced charges against officers, directors and major shareholders (insiders) of public companies for failing to timely report information about their holdings and transactions in company stock, and also against certain publicly traded companies for contributing to the filing failures by insiders. The charges stem from late or delinquent Form 4 and Schedules 13D and 13G reports that insiders are required to file regarding their transactions in and holdings of public company stock.

Although these violations stem from insider reporting requirements, some public companies were charged with violations as well. The SEC notes that "issuers who voluntarily accept certain responsibilities and then act negligently in the performance of those tasks may be liable as a cause of Section 16(a) violations by insiders."

The SEC periodically engages in initiatives to identify repeated late filers, and it seems to be engaging in one of those sweeps now. In these sweeps, the SEC generally looks for the most egregious cases, where insiders have had numerous violations in their reporting. For example, one case included in excess of 150 untimely Form 4s, even though for the vast majority of the incidents the company had the information to make filings in a timely fashion.

Public companies and insiders should consider reviewing their historical filings to insure that they are up to date, and insure that their future filings are made on a timely basis. In addition, public companies that are assisting their insiders with the filings should be conscious that their failure to act in a timely fashion could result in SEC administrative action against them. The typical penalty in these cases is a cease and desist order and monetary damages.


capital markets, corporate governance, securities litigation & enforcement