SEC fines CFO, others for stock trade filing ‘delinquencies’

Dive Brief:

A former top executive of energy technology company Baker Hughes and the CFO of drone maker AgEagle Aerial Systems were among a number of individuals and companies charged by the Securities and Exchange Commission for alleged “delinquencies” related to required insider trading reports, the agency said Wednesday.
The charges stem from an SEC enforcement initiative focused on Form 4 and Schedules 13D and 13G reports that company insiders are required to file regarding their holdings of company stock, the commission said in a press release. Enforcement staff used data analytics to identify the charged insiders as chronic late filers, the agency said, adding that some reports were submitted months or even years beyond the due date.
In separate enforcement actions, the SEC charged six corporate officers, directors, and shareholders, as well as five public companies. Without admitting to or denying the allegations, the parties agreed to cease and desist from violating agency rules and to pay civil penalties ranging from $66,000 to $200,000 and totaling $1.6 million, according to the release.

Dive Insight:

The charged corporate insiders and companies deprived investors of timely information related to over $90 million in transactions, SEC Enforcement Director Gurbir Grewal said.

The batch of cases “make clear that we will not hesitate to charge companies for causing their insiders’ disclosure violations where the companies took on the responsibility for making relevant filings for their insiders, and then acted negligently,” he said in the release.

The actions also serve as a reminder to SEC filers that “reporting obligations under the securities laws are not optional, and there are consequences for failing to file required forms in a timely manner,” Sanjay Wadhwa, deputy director of the agency’s enforcement division, said in the release.

More broadly, the announcement highlights the SEC’s ramped up enforcement approach, according to Robert Weber, a securities regulation and corporate finance law professor at Georgia State University.

“While most of the attention to this enforcement push has rightly focused on salient, hot-button issues like regulation of digital assets, ethics breaches at accounting firms, and recordkeeping and disclosure failures by Wall Street firms, the SEC is reminding the business community of the importance of investing in their securities compliance function throughout the organization,” Weber said in an email.

The six individuals charged included Matthias Heilmann, former CEO of Digital Solutions within Baker Hughes, and Nicole Fernandez-McGovern, CFO of AgEagle. Heilmann agreed to pay $143,000 in civil penalties, while Fernandez-McGovern agreed to pay $125,000. Altogether, the six individuals agreed to pay a combined $754,000.

The five public companies, AgEagle, Cumberland Pharmaceuticals, eXp World Holdings, Lattice Semiconductor, and SolarEdge Technologies, were charged for either contributing to the filing delinquencies or failing to report them, the SEC said. They agreed to pay a combined $815,000 in civil penalties, with the three highest amounts coming from Cumberland ($200,000), Lattice ($185,000), and AgEagle ($190,000).

Form 4 is a report that corporate officers, directors, and certain beneficial owners of more than 10% of a registered class of a company’s stock must use to report their transactions in company stock within two business days. Schedules 13D and 13G are reports that beneficial owners of more than 5% of a registered class of a company’s stock must use to report their holdings and intentions with respect to the company.

Such ownership reports give investors and other market participants the opportunity to evaluate whether the holdings and transactions of company insiders could be indicative of the company’s future prospects, the SEC said.

In the cases announced Wednesday, some filings were delayed by weeks, months, or even years, according to the release. The agency said reporting requirements apply irrespective of whether the trades were profitable and regardless of a person’s reasons for the transactions.