Section 16(a) of the Exchange Act and the rules promulgated thereunder apply to every person who is the beneficial owner of more than 10% of any class of any equity security of a public company, and any officer or director of a public company. The Securities and Exchange Commission announced a sweeping group of charges against 34 officers, directors and major shareholders for failing to make their section 16 reports.
Apparently, the SEC had an initiative underway to review filing deficiencies and identified individuals and companies with especially high rates of filing deficiencies. These ownership reports can give investors the opportunity to evaluate whether the holdings and transactions of company insiders could be indicative of the company’s future prospects.
Andrew M. 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.”
Clearly, the SEC is making a statement by announcing these 34 sets of charges. (33 of the 34 have already agreed to settle.) Time to review filings if you are subject to these reporting requirements.
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