SEC Charges Eight Companies for Failure to Disclose Complete Information on Form NT

Stinson - Corporate & Securities Law Blog
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Stinson - Corporate & Securities Law Blog

The Securities and Exchange Commission charged eight companies for failing to disclose in SEC Form 12b-25 filings, commonly known as Form NT, that their request for seeking a delayed quarterly or annual reporting filing was caused by an anticipated restatement or correction of prior financial reporting. The companies agreed to pay penalties of $25,000 to $50,000 each.

According to the SEC, Rule 12b-25 provides that if an issuer fails to file a Form 10-K or 10-Q within the time period prescribed for such report, the issuer, no later than one business day after the due date for such report, shall file a Form 12b-25 with the Commission, disclosing the issuer’s inability to file the report timely and the reasons therefore in reasonable detail. Form 12b-25 requires the issuer to affirm, among other things, that the subject periodic report will be filed within fifteen calendar days, for a Form 10-K, or within five calendar days, for a Form 10-Q, of the report’s prescribed due date, and requires that the report actually be filed within such period. Form 12b-25 also requires the issuer to confirm whether or not it anticipates that any significant change in results of operations from the corresponding period for the prior fiscal year will be reflected by the earnings statements to be included in the subject periodic report. If such change is anticipated, the issuer must attach a narrative and quantitative explanation of the anticipated change and, if appropriate, state the reasons why a reasonable estimate of the results cannot be made.

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.

According to the SEC, they will “continue to use data analytics to uncover difficult to detect disclosure violations.”  Data analytics are sometimes referred to as robo-cop routines.  It’s probably not that hard to match up Form 12b-25’s with Form 8-K’s announcing restatements filed in short proximity of one another.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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