SEC Settles Charges Against Fish Oil Manufacturer for Misrepresenting Compliance with Loan Covenants
Aug. 29, 2019
File No. 3-19398
August 29, 2019 - The Securities and Exchange Commission today announced the institution of settled cease-and-desist proceedings against a Houston-based manufacturer and distributor of omega-3 fish oils, Omega Protein Corporation ("Omega"), for misrepresenting its compliance with federal loan covenants in its SEC filings. Omega agreed to settle these charges without admitting or denying the findings in the SEC's order.
According to the SEC's order, Omega obtained loans from the federal government, which provided or guaranteed loans to the company as part of a broader program to support the national fishing and aquaculture industry. In January 2017, Omega pleaded guilty to violations of the Clean Water Act and admitted that, on two dates in 2014 and 2016, it discharged pollutants into the waters of the United States. As alleged in the SEC's order, this conduct violated Omega's federal loan covenants, which required compliance with applicable federal environmental laws. The order finds that, in its 2014 annual report and three quarterly reports filed with the SEC in 2015, Omega falsely represented that it was in compliance with all of its federal loan covenants, including those requiring compliance with federal environmental laws. The company's violation of its loan covenants was a default, according to the order, that could have required Omega to pay accelerated interest under its outstanding loan agreements. Because Omega misrepresented its covenant compliance in its annual and quarterly reports, investors were not informed of Omega's exposure to accelerated interest charges.
The order finds that Omega violated the antifraud provisions of Section 17(a)(2) of the Securities Act of 1933 and the reporting provisions of Section 13(a) of the Securities Exchange Act of 1934 and Rules 13a-1 and 13a-13 thereunder, orders Omega to cease and desist from committing or causing any future violations of these provisions, and orders Omega to pay a civil penalty of $400,000.
The SEC's investigation was conducted by Patrick L. Feeney and Kevin Guerrero, with assistance from Peter Rosario, and supervised by Antonia Chion.