SEC Will Be Serious on Crowdfunding Reporting

CrowdFundBeat News Wire,

Title III, Sec. 304(b) of the Crowd Fund Act of 2012 will require that issuers file annual reports with the Securities and Exchange Commission.

The SEC is serious about reporting.


Witness the SEC’s charge against W2007 Grace Acquisition I Inc., a real estate investment firm, with failing to make eight public filings based on what appears to be a math mistake in calculating the number of its shareholders.

To settle, W2007 Grace, which is indirectly owned by one or more private equity funds affiliated with The Goldman Sachs Group Inc., agreed to pay $640,000.

SEC Charges Issuer for Failing to Make Public Filings


Washington D.C., April 22, 2015 —The Securities and Exchange Commission today charged W2007 Grace Acquisition I Inc., a real estate investment firm, with failing to make required public filings.  W2007 Grace, which is indirectly owned by one or more private equity funds affiliated with The Goldman Sachs Group Inc., has agreed to pay $640,000 to settle the SEC’s charges relating to eight missed filings.


According to the SEC’s order instituting administrative proceedings, W2007 Grace went “dark” in November 2007, after its reporting obligations for its class B and class C preferred shares were suspended upon its filing with the Commission a notice of suspension of its duty to file public reports pursuant to Section 15(d) of the Securities Exchange Act of 1934.  At the time, W2007 Grace had fewer than 300 holders of record of the preferred shares.  Once the suspension took effect, the rules required W2007 Grace to resume reporting if the number of holders of record on the first day of any subsequent fiscal year was 300 or more.


The SEC’s order finds that W2007 Grace incorrectly concluded that it had fewer than 300 holders of record on Jan. 1, 2014 by failing to properly apply Rule 12g5-1 of the Exchange Act.  Specifically, W2007 Grace improperly treated certain distinct corporations and custodial accounts as single holders of record.  As a result, W2007 Grace was required to resume making public filings in 2014, but failed to do so.


“When companies cease disclosures to the public and go dark, they must ensure that they accurately count their holders of record, so that investors are not deprived of information they are entitled to under the law.” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.  “W2007 Grace failed to correctly count their holders of record and this action should send the message that there will be consequences for such lapses.”


In addition to paying the civil monetary penalty, W2007 Grace must cease and desist from committing or causing any violations of Section 15(d) of the Exchange Act and Rules 15d-1, 15d-11, and 15d-13, and resume periodic reporting by filing an annual report on Form 10-K for fiscal year 2014 on or before May 15 and filing a Form 10-K on or before July 1 for fiscal year 2013 and any other periodic reports required to be filed.


The SEC’s investigation has been conducted by Megan R. Genet and Steven G. Rawlings of the SEC’s New York Regional Office, and has been supervised by Sanjay Wadhwa.

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