Yesterday, the SEC announced enforcement proceedings against eight companies for alleged disclosure deficiencies in Form 12b-25 filings. Here’s an excerpt from the SEC’s press release:
Public companies are required to file the SEC’s Form 12b-25 “Notification of Late Filing,” commonly known as “Form NT,” when “not timely” filing a Form 10-Q or Form 10-K and seeking additional days to file their reports. Companies must disclose on the Form NT why their quarterly or annual report could not be filed on time, as well as any anticipated, significant changes in results of operations from the corresponding period for the last fiscal year.
The SEC orders find that each of the companies announced restatements or corrections to financial reporting within 4-14 days of their Form NT filings despite failing to provide details disclosing that anticipated restatements or corrections were among the principal reasons for their late filings. The orders also find that the companies failed to disclose on Form NT, as required, that management anticipated a significant change in quarterly income or revenue.
Without admitting or denying the SEC’s allegations, each company consented to C&D enjoining them from future violations of Section 13(a) of the Exchange Act & Rule 12b-25, and agreed to pay penalties ranging from $25,000 to $50,000.
It’s been a while, but these aren’t the first enforcement actions targeting 12b-25 filings. In 2003, the SEC brought an enforcement action against Spiegel for alleged shenanigans surrounding a Form 12b-25 filing, and it subsequently brought a separate action against the company’s former audit committee chair arising out of the same allegations. In 2005, the SEC brought an enforcement action against FFP Marketing (and the two employees responsible for preparing the filing) for deficient 12b-25 disclosure.
In the SEC’s press release, acting Enforcement Director Melissa Hodgman said that these actions were the latest in which the SEC used data analytics to identify difficult to detect disclosure issues. That’s something we blogged about last fall, when the SEC announced the first actions under its “EPS Initiative.”
-John Jenkins, TheCorporateCounsel.net April 30, 2021