Nature's Sunshine Products, Inc., Exchange Act Rel. 59268, January 21, 2009
Time since appeal filed – 1 year, 1 month, 22 days.
Time since last brief – 1 month, 16 days
Pages – 16
Footnotes – 50
The ALJ revoked Nature's Sunshine Exchange Act registration in late 2007 for failing to file any annual reports since 2004 and by failing to file quarterly reports since mid-2005. The Commission upheld the revocation.
After the company's auditors resigned, it continually promised to cure the delinquency. It finally filed a limited number of the required annual and quarterly reports in October 2008.
Since the Commission has held periodic filings to be mandatory – why when the violations are recurring over a long period did the Commission here delay taking action? The Commission explained its revocation by citing the fact that the company is still not in compliance despite numerous promises. The Commission emphasized that a delinquent company's registration will be revoked even if the company has substantial ongoing business operations. Revocation is not reserved for shells. The Commission clearly was offended that the company attempted to file the delinquent filings on the eve of oral argument two weeks ago. It found those filings to be deficient. The defense argument that this was a corporate death penalty was rejected. The Commission noted that the company could file a new registration statement at any time so long as it contained the required audited financial statements.
This one is weird. After the ALJ revoked the company's registration in 2007, the Commission apparently stayed its hand only to then revoke the registration. Perhaps the Commission was giving the company time to become current. Why it should do so is never explained. But is it reasonable to hold trading markets hostage for more than a year after the company has been delinquent for a sustained period, proceedings have been brought and an ALJ has revoked the company's registration? What standards does the Commission use to determine how much time is enough time to wait for a company to attempt to become current in its filings? Every argument that the Commission trots out to justify the revocation was equally persuasive a year ago. At the very least, if the Commission is going to delay ruling on ALJ decisions in these 12(j) proceedings, it owes issuers and investors an explanation of the factors it will use to delay a final decision. Arbitrary delay with no standards is an not appropriate.