SECURITIES EXCHANGE ACT OF 1934
Exchange Act § 13(a)
Periodic Financial Reporting Mandate
KEY FACTS
- Statutory provision: Exchange Act § 13(a) under the Securities Exchange Act of 1934.
- Scienter standard: Strict Liability / Negligence (No Scienter Required).
- Standard statutory remedies: Cease-and-desist orders, restatement mandates, revocation of securities registration, civil penalties against issuer.
Statutory Scope & Legal Description
Requires every issuer of a registered security to file annual reports (Form 10-K) and quarterly reports (Form 10-Q) that contain complete, accurate, and non-misleading financial statements.
Legal Elements Required for Enforcement Liability
- 1 Status as a reporting issuer with registered securities
- 2 Filing of periodic reports containing materially inaccurate financial statements
- 3 No proof of fraudulent intent is required; reporting inaccuracy alone establishes liability
Legal Standards Profile
Scienter Burden: Strict Liability / Negligence (No Scienter Required)
Statutory Remedies: Cease-and-desist orders, restatement mandates, revocation of securities registration, civil penalties against issuer.
Jurisdiction: United States Federal Law
Enforcement Precedents Charging Exchange Act § 13(a)
3 Selected Precedents| Case | Status | Overstatement | Penalties |
|---|---|---|---|
| WorldCom: $11B Operating Expense Capitalization Fraud WorldCom falsely classified over $3.8 billion in routine line costs as long-term capital expenditures and improperly released reserve cushions, transforming massive operational losses into billions in fraudulent pre-tax earnings. | Adjudicated | $11.0B | $750.0M |
| Enron Corp.: Off-Balance-Sheet SPEs and Mark-to-Model Fabrication Enron used hundreds of unconsolidated special purpose entities (SPEs) funded with Enron stock to hide debt, scrub merchant investment losses, and book billions in mark-to-model paper gains. | Adjudicated | $1.2B | $23.8M |
| General Electric: $200M SEC Penalty for Long-Term Care and Power Accounting Misled investors regarding power segment cash flows and quietly lowered loss reserves for runaway long-term care liabilities. | Settled, neither admitted nor denied | $22.0B | $200.0M |