The SEC has announced settled charges against 23 entities and individuals for failures to timely report information about their holdings and transactions in public company stock.

Two public companies were also charged for contributing to filing failures by their officers and directors and failing to report their insiders’ filing delinquencies as required.

The charges announced today stem from SEC enforcement initiatives focused on Schedules 13D and 13G reports and Forms 3, 4, and 5 that certain corporate insiders are required to file. Schedules 13D and 13G provide information about the holdings and intentions of investors who beneficially own more than five percent of any registered voting class of public company stock.

And Forms 3, 4, and 5 are reports used to provide information about public company stock transactions by corporate officers, directors, or certain investors who beneficially own more than 10 percent of the stock.

These reporting requirements apply irrespective of whether the trades were profitable and regardless of a person’s reasons for the transactions. 

The SEC staff said it used data analytics to identify those individuals and entities who were charged as having filed these required reports late.

The charges and penalties

The firms charged in connection with beneficial ownership of publicly traded companies and their respective penalties are:

• Sunbeam Management, LLC: $40,000;
• TALANTA Investment Group, LLC: $45,000;
• Grays Peak Ventures LLC: $65,000;
• Stilwell Value LLC: $75,000;
• BSC, LP: $75,000;
• Bain Capital Credit Member, LLC: $130,000;
• FIG LLC, which conducts business under the name Fortress Investment Group: $200,000;
• Adage Capital Management, LP: $200,000;
• Essex Woodlands Management, Inc.: $225,000;
• The Goldman Sachs Group, Inc.: $300,000;
• Oaktree Capital Management, LP: $375,000;
• The Bank of Nova Scotia: $375,000; and
• Alphabet Inc.: $750,000.

Alphabet was also charged with failing to timely file Forms 13F, which are the reports institutional money managers are required to file regarding certain sizeable securities holdings.

The Individuals charged who were officers, directors, and/or beneficial owners of publicly traded companies, and the civil penalty each will pay, are:

• Mitchell P. Rales, of Potomac, MD: $10,000;
• Scott B. Stevens, of Bedford, NY: $20,000;
• Michael Winterhalter, of Dana Point, CA: $20,000;
• Pedro C. Gonzalez, of St. Petersburg, FL: $25,000;
• Curtis Drew Hodgson, of Addison, TX: $30,000;
• Kenneth E. Shipley, of Levelland, TX: $30,000;
• Peter M. Thomas, of Las Vegas, NV: $77,000;
• Howard S. Jonas, of Easton, PA: $90,000;
• David L. Kanen, of Parkland, FL: $109,000; and
• Jack W. Schuler, of Lake Bluff, IL: $200,000.

The public companies charged that contributed to filing failures and failed to report delinquencies, and the civil penalty each will pay, are:

• Legacy Housing Corporation: $200,000; and
• Celsius Holdings, Inc.: $200,000.

Beneficial ownership

The beneficial ownership reporting requirements of the federal securities laws are located within SEC Rule 13d-1. They require any person who directly or indirectly acquires beneficial ownership of more than five percent of a voting class of any equity security registered under the Exchange Act to file a statement with the SEC. Beneficial owners can comply with this requirement by filing a Schedule 13D with the SEC within 10 days after they acquired the requisite amount of beneficial ownership.

Last October, the SEC adopted amendments to the governing beneficial ownership reporting rules under Exchange Act Sections 13(d) and 13(g), updating Reg 13D-G to “require market participants to provide more timely information on their positions to meet the needs of investors in today’s financial markets.”

The amendments accelerated the filing deadlines for Schedules 13D and 13G and were instated to ensure investors receive material information in a more timely way, to reflect advances in modern communication technology.

The SEC’s rules on beneficial ownership – and the ones imposed by the Financial Crimes Enforcement Network – are part of a broad effort by US authorities to stop criminals and terrorists from using anonymous shell companies to hide their dirty money.