Tag: antifraud violations
SEC charges Becton Dickinson with misleading investors about regulatory risks and product sales
The SEC has announced settled charges against Becton, Dickinson and Company, a medical device manufacturer known as BD listed on the NYSE, for “repeatedly misleading investors about risks associated with its continued sales of its Alaris infusion pump and for overstating its income by failing to record the costs of fixing multiple software flaws with the pump.” In essence, the company failed to disclose that it needed, but did not have, FDA clearance for certain changes to the software for its Alaris product, sales of which contributed about 10% of BD’s profits. Without those changes, the product was potentially harmful to patients. “Rather than inform investors that these issues heightened the risk that the FDA would limit BD’s ability to continue selling Alaris,” the SEC charged, “BD made misleading statements in its periodic reports about its regulatory risks.” BD agreed to pay a $175 million civil penalty. Companies in the life sciences should take note that this is yet another recent Enforcement action aimed at a life science company’s alleged misleading statements, including hypothetical or generic risks, regarding regulatory (FDA) status; in charges announced earlier this month against Kiromic BioPharma, the SEC alleged that Kiromic had failed to disclose that the FDA had placed both of its INDs on clinical hold. (See this PubCo post.) According to Sanjay Wadhwa, Acting Director of SEC Enforcement, “BD repeatedly painted a misleading picture of its Alaris infusion pump for investors and then doubled down by keeping them in the dark when the device’s issues came to a head with the FDA in late 2019….Public companies have a fundamental duty to accurately disclose material business risks and should expect to be held accountable when they fall short in that regard.”
Happy Holidays!
Was it SPAC week? SEC charges SPAC with misleading statements
Perfectly calibrated to slap an exclamation point on last Wednesday’s 581-page SPAC release (see this PubCo post), this new SEC Order, posted the following day, reflects settled charges against Northern Star Investment Corp. II, a SPAC, for misleading statements in its SEC filings in connection with its SPAC IPO and failed de-SPAC transaction. In the SPAC release, the SEC noted concerns from commentators regarding the adequacy of the disclosures provided to investors in SPAC IPOs and de-SPAC transactions. In this case, the SEC charged that Northern Star stated in its SEC filings that, prior to filing its S-1 for its IPO, it had had no substantive discussions with any potential target; in reality, however, Northern Star had had several discussions with the ultimate target regarding a potential SPAC business combination. According to the Director of the SEC’s Philadelphia Regional Office, “Northern Star’s failure to disclose discussions with its merger target kept investors in the dark about its future plans, information that would have been important in deciding whether to invest in this SPAC….Given that the purpose of a SPAC is to identify and acquire an operating business, SPACs should be transparent about any pre-IPO discussions with potential acquisition targets.” Northern Star was ordered to pay a civil money penalty of $1.5 million for violation of the antifraud provisions of the Securities Act.
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