Topic: Enforcement Actions

SEC Reminds Companies That Earnings Management Can Have MD&A Consequences

In a settled enforcement action against Under Armour Inc. announced on May 3, 2020 the SEC reminded companies that managing earnings, even if accounted for correctly, can have MD&A implications triggering disclosure obligations.  According to the SEC order, Under Armour, in order to meet analyst projections and sustain its 20% quarter over quarter revenue growth record, pressured customers to move purchases forward into the current quarter, and did this for a number of consecutive quarters.

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SEC Provides Reminder that Form 12b-25 is a Disclosure Document

The SEC’s Division of Enforcement announced on April 29, 2021 settled enforcement ‎actions against eight companies for failure to adequately disclose the reasons for their inability to ‎timely file their Form 10-Ks or Form 10-Qs when filing a Form 12b-25 (commonly known as ‎‎“Form NT”) to extend the time to file those reports.‎

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SEC Enforcement Action Is a Reminder of the Importance of Regulation FD Compliance

The Securities and Exchange Commission (“SEC”) adopted Regulation FD (Fair Disclosure) in ‎‎2000 to help level the playing field among market participants by proscribing the selective ‎disclosure of material nonpublic information. Regulation FD has had a profound impact on ‎public company communications practices and public disclosures.

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Disclosure Violations Arising from Operational Wrongdoing

The recent SEC enforcement action against Volkswagen AG and its former CEO illustrates the ‎securities law consequences of operational wrongdoing.‎ ‎ As described by the SEC, from at least ‎‎2007 through 2015, Volkswagen sold “clean diesel” cars while concealing their emissions ‎problems through use of an undisclosed defeat device.

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SEC Takes Seriously Both Internal Control Weakness Disclosure and Remediation

On January 29, 2019, the SEC announced settled enforcement actions against four companies for ‎failures to maintain internal control over financial reporting (“ICFR”) as required by Section ‎‎13(b)(2)(B) of the Securities Exchange Act and Rule 13a-15 over extended periods even though ‎in most cases material weaknesses in their ICFR were disclosed.‎

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Locke Lord QuickStudy: SEC Office of Compliance Inspections and Examinations Release National Exam Program Examination Priorities for 2019

On December 20, 2018, the Office of Compliance Inspections and Examinations (“OCIE”) of the Securities and Exchange Commission (“SEC”) issued its 2019 examination priorities letter. OCIE releases examination priorities annually in order to provide a summary of key areas where OCIE intends to focus resources in the coming year. 

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SEC Speaks: Digital Asset Securities Issuance and Trading

On November 16, 2018, the SEC’s Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets (the “Divisions”) issued a statement on “Digital Asset Securities Issuance and Trading.” The statement highlights several recent SEC enforcement actions involving the intersection of the U.S. securities laws and new technologies.

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