Section 13a Violation

Dmitriy Smirnov
February 29, 2024
Securities Law

Section 13(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and the rules promulgated thereunder require issuers of securities registered pursuant to Exchange Act Section 12 to file with the Commission current and accurate information in periodic reports, even if the registration is voluntary under Section 12(g). Specifically, Rule 13a-1 requires issuers to file annual reports, and Rule 13a-13 requires domestic issuers to file quarterly reports. The failure to file timely periodic reports can constitute a violation of Exchange Act Section 13a-1 and Rules 13a-1 and 13a-13 thereunder.

Reporting companies need compliance and litigation counsel that will apprise them of the need to maintain accurate and timely reporting requirements or risk an SEC enforcement action. Recently, the SEC brought an administrative action against Global Wholehealth Partners Corporation (“GWHP” or “Respondent”), a Nevada corporation located in Newport Beach, California with a class of securities registered with the Commission pursuant to Exchange Act Section 12(g). The SEC filed an Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Exchange Act because GWHP was delinquent in its periodic filings with the Commission, “having not filed any periodic reports since it filed a Form 10-K/A for the period ended June 30, 2022, which reported a net loss of $5,154,953 for the prior twelve months. 

What reporting companies like GWHP may not appreciate is that the SEC takes the position that reporting companies who fail to file timely reports are harming investors who are forced to make trading decisions on dated and perhaps inaccurate information. In the case of GWHP, the SEC’s Division of Corporation Finance issued a delinquency letter to the company requesting compliance with its periodic filing obligations, and the company failed to heed the warning. As a result, the SEC is going to ask the Administrative Law Judge in the case to suspend trading in GWHP’s stock for 12 months, which often spells disaster for a reporting company. 

Any reporting company like GWHP that receives a delinquency letter or receives notice of an OIP should immediately contact competent securities counsel to deal with the SEC.  Hiring a lawyer who understands this landscape and the SEC’s enforcement toolkit is critical when facing an investigation or enforcement action brought by the Commission. 

Alejandro Soto is a former senior official with the SEC and leads Fridman Fels & Soto, PLLC’s Securities Litigation and SEC Enforcement Practice Group.