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SEC Obtains Settlements in Two Cases Involving Disclosure and Corporate Control

The SEC settled separate administrative proceedings against CVR Energy, Inc. ("CVR Energy") and against a group of named investors ("Respondents") for "disclosure violations that deprived investors of material information during battles for corporate control of publicly traded companies."

In the proceeding against CVR Energy, the SEC determined that the oil refinery company violated Section 14(d) of the Securities Exchange Act by failing to adequately disclose in proxy materials the terms of fee arrangements with two banks hired to assist CVR Energy in a defense against a hostile tender offer. Specifically, CVR Energy disclosed that its fee arrangements with the banks were "customary" when, under the arrangements, the banks were entitled to "success" fees even if CVR Energy's tender offer defense failed. The SEC found that as a consequence, CVR Energy's shareholders were unaware of potential conflicts of interest stemming from the fee arrangements when considering the tender offer. In light of CVR Energy's cooperation, the SEC did not impose a civil penalty.

In a separate proceeding, the SEC determined that Respondents Jeffrey E. Eberwein, Charles M. Gillman, Lone Star Value Management, LLC, Boston Avenue Capital, LLC, and Heartland Advisors, Inc. committed various violations of Sections 13(d) and 16(a) of the Securities Exchange Act "during a series of five campaigns to influence or exert control over microcap companies." The SEC found that the Respondents failed to (i) timely disclose their beneficial ownership of stock, (ii) report their status as members of a "group," and (iii) disclose their purpose in acquiring the companies' stock. The SEC imposed civil penalties on each respondent ranging from $30,000 to $180,000.


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