Risk & Compliance

SEC Probe of Jones Soda Fizzles

The trading activities of executives are deemed not worthy of action, despite a plethora of shareholder lawsuits.
Stephen TaubOctober 29, 2007

The Securities and Exchange Commission has terminated an informal investigation of Jones Soda Co. and does not intend to recommend any enforcement action. The company said the probe related to trading by some company officers and directors.

The SEC advised Jones of its decision in a letter received by the company on October 25, something the regulator is not required to do but is said to be doing more frequently of late.

Jones did not provide details of the reasons behind the SEC’s inquiry. However, two separate class-action lawsuits filed in September accuse the company and some of its executives of violating federal securities laws by making false and misleading public statements that artificially inflated the company’s stock price. Both suits were filed in the United States District Court for the Western District of Washington.

In addition, a shareholder derivative complaint filed in the Superior Court in Washington’s King County alleges that after November 1, 2006, officers and directors breached their fiduciary duties, engaged in insider trading, and were unjustly enriched, damaging the company. The complaint seeks unspecified money damages, changes in corporate governance and internal procedures, equitable relief and restitution, and other relief.

The company also warned in its regulatory filing that it anticipates that actions similar to these may be filed in the future.