SEC Enforcement Actions Target Companies for Hiding Upcoming Restatements When Seeking Additional Time to File Periodic Reports

May 5, 2021

On April 29, 2021, the SEC announced settled charges against eight companies for failing to disclose in Form 12b-25 filings that their request to file a delayed quarterly or annual report was caused by an anticipated restatement or correction of prior financial reporting. The companies agreed to pay civil penalties ranging from $25,000 to $50,000.

Public companies are required to file the SEC’s Form 12b-25 “Notification of Late Filing,” commonly known as “Form NT,” when they are unable to file a Form 10-Q or Form 10-K on time without unreasonable effort or expense. Among other things, Form NT requires companies to disclose:

  • why their quarterly or annual report could not be filed on time; and
  • 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 disclose that anticipated restatements or corrections were among the principal reasons for their late filings. The orders also find that the companies failed to disclose that management anticipated a significant change in quarterly income or revenue.

The SEC’s press release hints at the agency’s growing technical sophistication. “As today’s actions show, we will continue to use data analytics to uncover difficult to detect disclosure violations,” said Melissa R. Hodgman, Acting Director of the SEC’s Enforcement Division. “Targeted initiatives like this allow us to efficiently address disclosure abuses that have the potential to undermine investor confidence in our markets if left unaddressed.”

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