The Securities and Exchange Commission (“SEC") announced charges against 34 reporting persons for late and missing filings on Form 13F and Form 13H earlier this month. The entities and individuals charged agreed to settlements with the SEC requiring payments of $7.2 million in penalties.
On September 17, 2024, the SEC announced charges against 11 institutional investment managers for failure to file Form 13F. Two of these institutional investment managers were also charged with failure to file Form 13H (a report required to be filed by certain “large traders" described below). While the SEC did not impose penalties on three of the firms, nine must pay an aggregate of $3.4 million in penalties. Notably, the three firms that escaped penalties self-reported their violations to the SEC and cooperated with the SEC’s investigations.
On September 25, 2024, the SEC announced charges against 23 entities and individuals for failure to file beneficial ownership reports on Schedules 13D and 13G and Section 16 reports on Forms 3, 4, and 5. The penalties ranged from $10,000 to $750,000, with all 23 entities and individuals required to pay an aggregate of $3.8 million. The firm that agreed to pay $750,000, the highest penalty ordered by the SEC, was also charged with failing to timely file Form 13F reports.
The late and/or missing filings include:
- Form 13F:[1] Eight institutional investment managers were ordered to pay penalties for failure to file Form 13F, in the amounts of $175,000, $225,000, $225,000, $225,000, $375,000, $475,000, $475,000 and $525,000. Larger penalties were associated with managers having more assets under management, ranging from $1-2 billion at the low end of the range to upwards of $10 billion at the high end.
- Form 13F and 13H:[2]One institutional investment manager was ordered to pay a penalty of $725,000 for failure to file Forms 13F and 13H.
- Schedules 13D and 13G: Twelve firms were ordered to pay penalties for failure to file Schedules 13D and 13G, in the amounts of $40,000, $45,000, $65,000, $75,000, $75,000, $130,000, $200,000, $200,000, $225,000, $300,000, $375,000 and $375,000. Smaller penalties were associated with a single missed or late filing, while larger penalties were associated with 10-20 or more missed or late filings with respect to multiple issuers. In addition, two public companies were ordered to each pay a penalty of $200,000 for contributing to filing failures and failing to report delinquencies.
- Schedules 13D and 13G and Form 13F: One firm was ordered to pay $750,000 for failure to file Schedules 13D and 13G and Form 13F.
- Forms 3, 4, and 5: Ten individuals who were officers, directors and/or beneficial owners of publicly traded companies were ordered to pay penalties for failure to file Forms 3, 4, and 5, in the amounts of $10,000, $20,000, $20,000, $25,000, $30,000, $30,000, $77,000, $90,000, $109,000 and $200,000. Smaller penalties were associated with missed or late filings with respect to a single issuer, while larger penalties were associated with missed or late filings with respect to multiple issuers (in one case, as many as six).
As a quick reminder, Form 13F is a quarterly report required to be filed by all institutional investment managers exercising investment discretion over more than $100 million in Section 13(f) securities (which generally includes equity securities registered with the SEC and traded on a national securities exchange). As noted in our earlier blogs posts in July 2023 and July 2024, institutional investment managers who report on Form 13F must also file annually on Form N-PX to report their voting records.
Also, as a quick reminder, the SEC recently amended the 13D/G beneficial ownership reporting requirements. The updated deadline to file Schedule 13G amendments will go into effect on September 30, 2024 as follows:
- All 13G reporting persons, including exempt investors,[3] must file an amendment within 45 days after the calendar quarter end in which a material change occurred.
- Qualified institutional investors or QIIs[4] are subject to an accelerated amendment deadline of five business days after month-end in which beneficial ownership exceeds 10 percent of the covered class or such ownership increases or decreases by 5 percent.
- Passive investors with less than 20% beneficial ownership[5] must promptly amend within two business days after their beneficial ownership exceeds 10 percent of the covered class or such ownership increases or decreases by 5 percent.
Lastly, Form 13H reports are required to be filed by any “large trader" that crosses a specified trading activity threshold. A large trader is generally defined as any person or entity that trades: (a) on any single day, either two million shares or shares with a market value of $20 million, or (b) during any single calendar month, either 20 million shares or shares with a market value of $200 million. Once filing obligations are triggered, an initial Form 13H must be filed promptly and an annual amendment must be filed within 45 days after calendar year-end.
Our SRCG attorneys are available to assist with any questions on SEC filing obligations and deadlines.
We would like to thank Chris Connelly and Antony Nguyen in our Orange County office for their work on this post.
[1] One additional institutional investment manager was charged with failure to file Form 13F but was not ordered to pay any penalties.
[2] One additional institutional investment manager was charged with failure to file Forms 13F and 13H but was not ordered to pay any penalties.
[3] Filing on 13G pursuant to Rule 13d-1(d).
[4] Filing on 13G pursuant to Rule 13d-1(b).
[5] Filing on 13G pursuant to Rule 13d-1(c).