Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The SEC settled actions with ten companies for alleged Form 8-K violations.  The investigation centered on failure to file Form 8-K when shares of common stock are sold in transactions that are not registered with the SEC under the federal securities laws and constitute at least five percent of the total stock held by their shareholders.

The SEC alleged the following Form 8-K violations occurred:

  • Under Item 1.01 of Form 8-K, a registrant must disclose within four business days its entry into a material definitive agreement.
  • Under Item 3.02 of Form 8-K, a smaller reporting company must disclose within four business days the unregistered sales of equity securities unless they constitute less than five percent of the number of last reported shares outstanding of the class of equity securities sold.
  • In Form 10-Q or 10-K (quarterly or annual reports), issuers must disclose the number of outstanding shares of their common stock as of the latest practicable date, and the information must be true, correct, and complete.  Three of the companies allegedly failed to use accurate numbers when later reporting the dilution of their common stock in quarterly or annual reports.

The majority of the charged issuers appeared to be sitting ducks, with the increases reportedly being between 95% and 35,000%, with others at 7%, 15%, 25% and 50%.

Seven percent may be a “broken window” but it seems hard to take that position with some of the others.  It is also interesting no one was charged for disclosure controls and procedure violations and no individuals were charged.


Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 75 largest firms in the U.S., Stinson Leonard Street has more than 520 attorneys and offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.