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SEC Hits Companies for Stock Dilution Disclosure Failures

Joe Mont | November 7, 2014

The Securities and Exchange Commission this week announced enforcement actions against 10 companies that failed to make required disclosures about financing deals and other unregistered sales that diluted their stock.

Companies are required to file a Form 8-K when shares of common stock are sold in transactions that are not registered with the SEC and constitute at least five percent of the total stock held by their shareholders. They must also report when they’ve entered into a financing agreement not made in the ordinary course of business. These disclosures enable investors to be aware that stock dilution has occurred as a company issues additional shares in a financing transaction or other unregistered sale that has the effect of reducing the earnings per share and an investor’s percentage of ownership in the company.

SEC investigations found that each of the 10 companies it named failed to make the...

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