A Timely Form 12b-25 Reminder from SEC Enforcement!

By George Wilson

 

On April 29, 2021, with deadlines for first-quarter reports rapidly approaching, the SEC Enforcement Division sent an important message about using Form 12b-25 to request due date extensions.  Form 12b-25 is short and simple.  And while the extensions of 15 calendar days for an annual report and 5 calendar days for a quarterly report are not particularly long, they can be helpful to avoid becoming a non-timely filer and losing Form S-3 for twelve months. Yet, like all other SEC reports, if a 12b-25 is not complete there are consequences.

 

The likely source of problems with 12b-25 lies in “Part III – Narrative.”  Part III provides this instruction:

 

State below in reasonable detail why Forms 10-K, 20-F, 11-K, 10-Q, 10-D, N-CEN, N-CSR, or the transition report or portion thereof, could not be filed within the prescribed time period.

 

(Attach extra Sheets if Needed)

 

As we discuss in our Workshops, it is important to make complete disclosures of all the reasons for any delay.  One example we cite is a February 2005 enforcement case – FFP Marketing Company, Inc., Warner Williams, and Craig Scott, CPA.  In February 2002, FFP Marketing Company discovered its financial statements were materially misstated.  In a Form 12b-25 to extend the due date of its December 31, 2001 Form 10-K, the CFO/CLO failed to disclose this fact.  When the restatement came to light, the SEC enforced, sanctioned the company, and barred the CFO/CLO from SEC practice for three years.

 

While the FFP Marketing case was many years ago, on April 29, 2021, just before the due dates for first-quarter reports, the SEC  announced Form 12b-25 enforcement cases against eight companies.  Using data analytics, the SEC found that these companies filed Form 12b-25s that failed to disclose that “anticipated restatements” caused the delays.  Each of the companies entered into cease and desist orders and paid fines ranging from $25,000 to $50,000.

 

The loss of Form S-3 for twelve months, while not stated in the enforcement release, is also another likely consequence in this type of case.

 

As always, your thoughts and comments are welcome!

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