[This story previously appeared in Securities Regulation Daily.]
By Rodney F. Tonkovic, J.D.
The SEC has charged eight corporate insiders for failing to update Schedule 13D disclosures to reflect material changes, including going private transactions. The Commission found that the respondents had each taken significant steps to effect going private transactions that resulted in material changes from the disclosures previously made in their Schedule 13D filings. Each of the respondents settled the proceedings against them by paying civil penalties, without admitting or denying the Commission's allegations.
Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, said that investors are entitled to current and accurate information. He added: “Stale, generic disclosures that simply reserve the right to engage in certain corporate transactions do not suffice when there are material changes to those plans, including actions to take a company private.”
First Physicians Capital Group transactions. Six of the orders relate to steps taken by the respondents in 2014 to take First Physicians Capital Group, Inc. (FPCG) private. The Ciabattoni Living Trust and Anthony and Jane Ciabattoni failed to amend their respective disclosures until June 20, 2014. The Trust and the Ciabattonis also engaged in 12 transactions acquiring or disposing of their beneficial ownership of FPCG securities between 2010 and 2014, but did not report any of these transactions until June 20, 2014. The Trust and the Ciabattonis were jointly and severally ordered to pay a civil money penalty in the amount of $75,000.
SMP Investments I, LLC and Brian Potiker waited approximately three months to update their Schedule 13D disclosure after taking steps to further the FPCG transaction. The Commission also found that SMP and Potiker violated Section 16(a) by failing to report material transactions in FPCG shares until months or years later. SMP and Potiker were jointly and severally ordered to pay a civil money penalty in the amount of $63,750.
Finally, William Houlihan waited approximately five months before amending his previous Schedule 13D after taking a series of steps to effectuate a going private transaction for FPCG. He also violated Section 16(a) by waiting more than five months to report a material transaction in FPCG shares. Houlihan was ordered to pay a civil money penalty of $15,000.
Shuipan Lin. Next, Shuipan Lin, Chairman and CEO of Exceed Company Ltd., failed to timely amend his Schedule 13D report after taking steps to take Exceed private. According to the Commission, Lin took steps to effectuate a going private transaction beginning in October 2012, but waited until August 20, 2013, to file an amendment to report that his plans or proposals concerning Exceed's shares had materially changed. Additionally, Lin did not file his initial Schedule 13D report until May 2011, even though his filing obligation began in October 2009, and he failed to report a subsequent acquisition of Exceed shares. Lin agreed to pay a civil penalty of $30,000.
Berjaya Lottery Management. Finally, Berjaya Lottery Management (H.K.) Ltd. violated its beneficial-ownership disclosure requirements in connection with actions it took to further a going private transaction for International Lottery & Totalizator Systems, Inc. (ILTS). Berjaya, a majority holder of ILTS securities, took steps to take the company private in July 2013, but did not amend its Schedule 13D to reflect this material change until March 2014. Berjaya was ordered pay a civil money penalty in the amount of $75,000.
The releases are Nos. 34-74497; 34-74498; 34-74499; 34-74500; 34-74501; 34-74502; 34-74503; and 34-74504.