How Securities and Exchange Commission Periodic Filings May Lead to Fraud Charges

The Securities and Exchange Commission requires three quarterly filing and an annual filing by most publicly traded companies.  These filings, known as a “10-Q” for a quarterly filing and a “10-K” for an annual filing, contain information about both the business aspects of the reporting company and its financial position.  In fact, the annual filing must have audited financial statements included.

Investors or potential investors use the information in these reports to make decisions about whether to purchase the securities of the reporting companies.  Thus, the contents of these reports are vitally important as they serve as bases of information about the company that the investing public uses to make investment decisions.  As a result, the SEC considers the accuracy of the information in these filings to be of paramount importance.

If the business or financial information is believed to be inaccurate, the SEC will begin an inquiry or investigation to determine the following:  1) whether inaccuracies do exist, 2) whether the inaccurate information presented is material in that it would be information that a reasonable investor would consider in making a decision to purchase or sell the security, and 3) whether the company acted with scienter or guilty knowledge in filing the inaccurate information.

If the SEC believes that the answer to each question is positive, it may well bring an enforcement action against the reporting company and officers alleging fraud.  Defending an SEC fraud investigation or complaint requires skilled experience in that area of the law to bring about the best possible result.

Leave a Comment

Your email address will not be published. Required fields are marked *