33 Insiders, Companies Settle Late Reporting Allegations in SEC Sweep

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By Richard Hill

Sept. 10 — Thirty-three corporate officers, directors, major shareholders, investment firms and companies agreed to pay approximately $2.6 million Sept. 10 to settle Securities and Exchange Commission administrative allegations that they either failed to promptly file information about their stock holdings, or contributed to late filings.

A 34th respondent, Ligang Wang, vice president of China Shen Zhou Mining & Resources, did not settle allegations he failed to file reports on sales of more than 165,000 shares worth more than $1 million (In re Wang,SEC, Admin. Proc. File No. 3-16094, 9/10/14). His attorney could not be identified immediately.

The settling parties did not admit or deny the allegations.

The SEC said it used quantitative data and algorithms developed by staff to uncover those who “repeatedly” filed late reports about holdings in their company stock. SEC Enforcement Director Andrew Ceresney said the large number of respondents is meant to “emphasize the message of the case” and is a tactic he envisions utilizing again.

Three of the corporate respondents agreed to pay $150,000, with the other three paying $75,000. The 17 individuals who settled—a group comprised of officers, directors and major shareholders—agreed to pay between $25,000 and $100,000. The investment firms, meanwhile, which were named as beneficial owners of the stock, and agreed to pay in a range of between $60,000 and $120,000.

Types of Forms Involved

Two types of reports were involved: Form 4s, which must be filed by officers, directors and 10 percent shareholders about transactions in their company's stock; and Schedule 13D and Schedule 13G, which are used by beneficial owners of more than 5 percent of a company's to report their holdings and intentions.

These filings, Ceresney told reporters on a conference call, are meant to present “highly current and comprehensive information” about the holdings and transactions of company insiders and major shareholders. “Many investors track and consider the reports in making investment decisions,” he said.

Ceresney said the case represents a “proactive” effort on the part of the SEC to identify those with “especially high levels of late-filed reports.” The case can serve to “remind and incentivize” to file reports promptly, he said.

The companies sued by the SEC either failed to name their insiders and shareholders who failed to file or who filed late, or they contributed to the late filings or both. “Companies must name names and call out violators,” Ceresney said.

Topic `Warranted Attention.'

Staff identified late reporting as an “area that warranted attention” and created the algorithms to identify and track violators, Ceresney said. Doing so, he said, allowed the division to make allegations “on a large scale while conserving Enforcement resources.”

Ceresney said the expansive enforcement initiative is meant to emphasize that the SEC “can bring a bunch of actions in connection with violations we see in order to emphasize the message from those actions.” That message, he said, is “there needs to be increased focus on this area, and there needs to be additional resources and attention” to ensure compliance.

Ceresney said he could not say if the SEC planned additional cases for late reporting, but added that “it is an area we are focused on.”

The Enforcement Division director said the SEC has other initiatives that could utilize quantitative data and algorithms, but he declined to identify them. He added that bringing cases in mass numbers also is a strategy it plans to repeat.

To contact the reporter on this story: Richard Hill in Washington at mailto:%20rhill@bna.com

To contact the editor responsible for this story: Susan Jenkins at mailto:%20sjenkins@bna.com

The order in the Wang case is available at http://www.sec.gov/litigation/admin/2014/34-73065.pdf.

The settlement orders in the other cases are available at http://www.sec.gov/litigation/admin.shtml.


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