Risk & Compliance

SEC Fines 10 Firms for Failing to Make 8-K Disclosures

The companies failed to report or misreported highly dilutive financing agreements, the regulator said.
Matthew HellerNovember 5, 2014
SEC Fines 10 Firms for Failing to Make 8-K Disclosures

The U.S. Securities and Exchange Commission on Wednesday accused 10 companies of failing to make required disclosures about financing arrangements that diluted their stock.

The deals that were not reported in 8-K filings included unregistered sales of stock and financing agreements. In addition, three of the 10 companies failed to use accurate numbers when they later disclosed the dilution of their stock in quarterly or annual reports.

To settle the SEC’s allegations, the companies agreed to pay a total of $350,000 in penalties, with six of them paying $25,000 each and four paying $50,000 each.

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“Public issuers must ensure that their SEC filings contain all required information so that investors can base decisions on current and accurate information,” Andrew J. Ceresney, director of the SEC’s Division of Enforcement, said in a news release. “These enforcement actions reinforce the ongoing need for full disclosure to shareholders concerning an issuer’s entry into highly dilutive financing agreements.”

Companies are required to file an 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 5% of the total stock held by their shareholders. They also must report when they have entered into a financing agreement not made in the ordinary course of business.

According to the SEC’s orders instituting settled administrative proceedings, the 10 companies either failed to disclose within four business days their entry into a material definitive agreement; to disclose within four business days the unregistered sales of shares; or to disclose or accurately disclose the number of outstanding shares of their common stock as of the latest practicable date.

“These disclosures enable investors to be aware that stock dilution has occurred,” the SEC noted.

The companies were identified as APT MotoVox Group, CoroWare, ERF Wireless, Green Automotive Co., MineralRite Corp., Mondial Ventures, Monster Arts, Red Giant Entertainment, Seaniemac International, and Worthington Energy.