SEC Charges Corporate Insiders for Failing to Timely Report Transactions and Holdings
The Securities and Exchange Commission today announced charges against six officers, directors, and major shareholders of public companies for failing to timely report information about their holdings and transactions in company stock. Five publicly-traded companies were also charged for contributing to the filing failures by insiders or failing to report their insiders’ filing delinquencies.
The charges stem from an SEC enforcement initiative focused on Form 4 and Schedules 13D and 13G reports that company insiders are required to file regarding their holdings of company stock. Form 4 is a report that corporate officers, directors, and certain beneficial owners of more than 10 percent of a registered class of a company’s stock must use to report their transactions in company stock within two business days. Schedules 13D and 13G are reports that beneficial owners of more than 5 percent of a registered class of a company’s stock must use to report their holdings and intentions with respect to the company. These ownership reports give investors and other market participants the opportunity to evaluate whether the holdings and transactions of company insiders could be indicative of the company’s future prospects. SEC enforcement staff used data analytics to identify the charged insiders as repeatedly filing these reports late. Some filings were delayed by weeks, months, or even years. The reporting requirements apply irrespective of whether the trades were profitable and regardless of a person’s reasons for the transactions.
“Timely disclosure of insider transactions is critically important to both investors and the fair, orderly and efficient operation of our securities markets. According to today’s orders, the insiders and companies charged in these matters in the aggregate deprived investors of timely information about over $90 million in transactions,” said Gurbir S. Grewal, Director of the SEC’s Director of Enforcement. “These enforcement actions also make clear that we will not hesitate to charge companies for causing their insiders’ disclosure violations where the companies took on the responsibility for making relevant filings for their insiders, and then acted negligently.”
“Several years ago, we undertook a similar initiative to root out repeated late filers,” said Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement. “Today’s enforcement action should serve to remind SEC filers that reporting obligations under the securities laws are not optional, and there are consequences for failing to file required forms in a timely manner.”
Without admitting or denying the findings, the following six individuals and five public companies agreed to cease and desist from violating the respective charged provisions and to pay the civil penalties set forth below:
- Nicole M. Fernandez-McGovern, CFO of AgEagle Aerial Systems Inc., $125,000;
- Matthias L. Heilmann, former President and Chief Executive Officer of Digital Solutions within Baker Hughes Co., $143,000;
- Joseph Theodore Lukens, Jr., a beneficial owner of Workhorse Group Inc., $120,000;
- Avery More, a director of SolarEdge Technologies, Inc., $66,000;
- Lawrence I. Rosen, a beneficial owner of JAKKS Pacific, Inc., Meet Group Inc., FTE Networks, Inc., FuelCell Energy Inc., and Remark Holdings Inc., $150,000; and
- Peixin Xu, a director and beneficial owner of Cineverse Corporation, $150,000.
- AgEagle Aerial Systems Inc., $190,000;
- Cumberland Pharmaceuticals Inc., $200,000;
- eXp World Holdings, Inc., $115,000;
- Lattice Semiconductor Corporation, $185,000; and
- SolarEdge Technologies, Inc., $125,000.
The SEC’s ongoing investigation of potential beneficial ownership violations is being conducted by Eric C. Kirsch, Bari R. Nadworny, and Wendy B. Tepperman of the New York Regional Office, Cassandra Arriaza and Dahlia Rin of the Boston Regional Office, Joshua Dickman, Douglas Dykhuizen, and Gregory Smolar of the Atlanta Regional Office, and Jennifer Furman Miller and Samika Osbourne of the Philadelphia Regional Office. The team has been assisted by Beth Groves, Howard Kaplan, and Alexander C. Lefferts of the Division of Enforcement’s Office of Investigative & Market Analytics and Michael Pessin of the Division of Economic and Risk Analysis. The team worked in close collaboration with Anne M. Krauskopf and Nicholas P. Panos in the agency’s Division of Corporation Finance. The investigation is being supervised by Thomas P. Smith, Jr. of the New York Regional Office.