Eight companies settled SEC charges for failing to adequately disclose in their Form NT reports (which companies file under SEA Rule 12b-25 ("Late Filing Notification") when they cannot make an annual or quarterly reporting filing on time), the reasons they did not timely submit their filings. The SEC stated that the actions were a result of an SEC initiative focused on companies that announced financial restatements or corrections following the submission of their Form 12b-25 filings.

In eight separate consent orders, the SEC alleged that the companies made material restatements or corrections to their financial reporting following their Form NT filings without explaining that the anticipated changes were among the primary reasons for their delayed filings. Additionally, the SEC found that the companies did not disclose that management expected substantial changes in the companies' quarterly income or revenue. As a result of its findings, the SEC determined that the companies violated Exchange Act Section 13(a) ("Reports by issuer of security; contents") and SEA Rule 12b-25.

To settle the charges, (i) the companies agreed to cease and desist from further violations, (ii) five of the companies agreed to $25,000 civil money penalties for a single deficiency in their Forms NT and (iii) three of the companies agreed to $50,000 civil money penalties for multiple Form NT, Form 8-K and Form 10-Q deficiencies.

Commentary

These actions, and the initiative behind them, may be a harbinger of things to come. This type of initiative - which brings a series of nearly identical enforcement actions at one time against a number of companies for relatively minor violations - was a common strategy used by the SEC during Chair Mary Jo White's "broken windows" policy, but had largely fallen out of favor under Chair Jay Clayton. As the Division of Enforcement shifts under the leadership of Chair Gary Gensler, we will likely see increased use of data analytic-driven initiatives like this one and other industry-wide sweeps leading to groups of enforcement actions in areas where the SEC has concerns about industry compliance with reporting requirements.

Primary Sources

  1. SEC Press Release: SEC Charges Eight Companies for Failure to Disclose Complete Information on Form NT
  2. SEC Order: Fortem Resources, Inc.
  3. SEC Order: Trutankless, Inc.
  4. SEC Order: ShiftPixy, Inc.
  5. SEC Order: Rokk3r, Inc.
  6. SEC Order: Daniels Corporate Advisory Company, Inc.
  7. SEC Order: HQDA Elderly Life Network, Inc.
  8. SEC Order: Asta Funding, Inc.
  9. SEC Order: Igen Networks Corp.

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