As I said the other night, they do have to report an investigation in a 10-K, which SPNG is supposed to come up with soon. I'd also call it a very serious material event.
SEC Enforcement - What Chief Legal Officers of SEC Reporting Companies Should be Focused On http://tinyurl.com/yacve8k
What should we disclose and when?
The SEC generally does not disclose the existence of an investigation and, if asked, will refuse to confirm or deny that it is investigating a particular target. Obviously if the investigation results in an enforcement action, that action will become public in the form of a public release.
In terms of public disclosure, there is no specific requirement to disclose the existence of an SEC investigation. If the company chooses to make a public disclosure, the CLO should coordinate with the response team to ensure that the message is consistent and honest. The CLO also needs to be mindful of Regulation FD obligations.
If the company does not currently intend to disclose the investigation, denying the existence of an investigation can have serious consequences. Among other things, it in and of itself can give rise to a claim of misleading public disclosure and has the strong potential to be interpreted by the SEC as an "uncooperative" move. As explanations for fines for failing to cooperate, the SEC cited, in the Dynegy enforcement action, false statements by the company's CFO regarding the underlying conduct that gave rise to improper accounting and misleading disclosure and, in the Lucent enforcement action, an interview given by the CEO and the general counsel in which they characterized fraudulent accounting as a "failure of communication." The SEC, and the courts, in a variety of contexts have made clear that if a company chooses to speak (and in denying an investigation, like denying ongoing merger discussions, a company is speaking), it must do so fully and honestly. Note that for US securities law purposes, a "no comment" response" is the equivalent of silence.
Some companies disclose an SEC investigation in the early stages after initial contact from the Staff. More often, companies will wait until receipt of a "Wells" notice, which indicates that the Staff has decided to recommend to the SEC that the SEC authorize an enforcement action. Other factors to consider are the materiality of the investigation (e.g., where the company or a whistleblower reported the matter to the SEC in the first place and the underlying facts known to the company suggest that the scope of the fraud is material) and the likelihood of a restatement or enforcement action. A company should also consider, from the standpoint of materiality, the scope of its insurance coverage and whether it would be exposed to significant unreimbursable defense costs.
The company may form a different view on disclosure if it is about to file its annual report on Form 10-K and certainly should consider the implications of non-disclosure if it plans to access the capital markets or has a "live" shelf registration statement in place. In addition to the traditional rationale for disclosing an investigation (as material information), the new internal control rules require management, in the company's annual report on Form 10-K, to state whether the company's internal controls are effective and to discuss any material weakness in internal control. Allegations of fraud are likely to raise questions of effectiveness of internal control, requiring disclosure.
Yep Like they say - "He who conceals a usefull truth is equally guilty of lies". In view of the current state of mayham- Q. Why did SEC wait to notify SPNG of need to reaudit? A. Maybe Shorts approved this act. Q.-Why not issue a trading halt untill 10K? A.-Maybe Shorts would not approve this act. Q.-Why not issue current complete share structure along with all RME transactions?. A.- Maybe Shorts like this confusion.
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