Don’t Think You Have to Worry About Timely Reporting Securities Transactions with the SEC? Think Again.

15 Sep
2013
By: Jessica R. Sudweeks

Officers, directors and major stockholders of publicly traded companies often casually comply with the reporting requirements of Section 13 (Schedules 13D and 13G) and Section 16 (Forms 3, 4 and 5) under the Securities Exchange Act of 1934 (also known as the Exchange Act), if at all. Thus far, this complacent attitude has not resulted in aggressive enforcement action by the SEC, until now.

Earlier this week numerous public companies, officers and directors found themselves in the SEC’s crosshairs for their failure to comply with Sections 13 and 16. In its enforcement actions, the SEC charged 28 corporate insiders for failure to promptly comply with the reporting requirements. Six publicly traded companies were also charged with contributing to violations of the reporting rules. These charges have resulted in settlements totaling $2.6 million, and litigation against one executive officer. In a press release issued by the SEC on September 10, 2014, Andrew Ceresney, Director of the SEC’s Enforcement Division, forcibly articulated the SEC’s renewed focus on prosecuting violations of Sections 13 and 16: “[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.” Andrew Calamari, Director of the SEC’s New York Regional Office, added, “The 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.”

All publicly traded companies and corporate insiders subject to the reporting requirements of Sections 13 and 16 should take immediate notice of these recent enforcement actions and the SEC’s public comments, as the SEC has clearly demonstrated its intent to pursue “even the smallest infractions”, as SEC Chairman Mary Jo White announced almost a year ago. As a result, corporate insiders should make the timely filing of Form 3s, 4s and 5s, and Schedule 13Ds and 13Gs, as well as any required amendments, a priority. The deadlines for filers associated with a company subject to the reporting requirements of the Exchange Act are listed below:

Filing


Subject of Filing


Deadline


Form 3 Newly appointed officers, directors or beneficial owner of more than 10 percent of a class of equity registered under the Exchange Act (also known as Section 16 insiders). Within 10 days after becoming a Section 16 insider.
Form 4 All Section 16 insiders. Within 2 business days after the transaction.
Form 5 Section 16 insiders who engaged in transactions reportable on a Form 5 during the last fiscal year. 45 days after the end of the fiscal year.
Schedule 13D Any 5 percent beneficial owner, as defined as defined in Rule 13d-3, who is not eligible to file a Schedule 13G. 10 days after acquiring more than 5 percent beneficial ownership.
Amendment to Schedule 13D Previous Schedule 13D filers that continue to maintain more than 5 percent beneficial ownership. Due “promptly” after material changes to ownership.
Schedule 13G Any eligible 5 percent beneficial owner, as defined as defined in Rule 13d-3. Eligibility to file Schedule 13G is determined in accordance with Rule 13d-1(c). 10 days after acquiring more than 5 percent beneficial ownership.
Amendment to Schedule 13G Previous Schedule 13G filers that continue to maintain more than 5 percent beneficial ownership and still qualify to file Schedule 13G. 45 days after the end of the calendar year.

If you would like assistance in complying with the reporting obligations, or would like a review of your securities holdings and transactions to ensure they are accurately reported, please contact either Jessica R. Sudweeks at jsudweeks@disclosurelawgroup.com, or Daniel W. Rumsey at drumsey@disclosurelawgroup.com.

*Please note that different deadlines apply to filers associated with a company that becomes subject to the Exchange Act reporting requirements for the first time.

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