SEC Orders Proceedings Against UDF After Enforcement Allegations
After an SEC investigation, United Development Funding III, LP, a Delaware limited partnership, United Development Funding IV, a publicly traded real estate investment trust (OTCMKTS: UDFI), and United Development Funding Income Fund V, were ordered to participate in public administrative proceedings.
After an investigation of United Development Funding by the Securities and Exchange Commission’s Division of Enforcement, it was determined that three of the company’s funds, including United Development Funding III, LP, a Delaware limited partnership, United Development Funding IV, a publicly traded real estate investment trust (OTCMKTS: UDFI), and United Development Funding Income Fund V, a Maryland real estate investment trust were collectively delinquent in their obligations to file timely periodic reports since September 30, 2015.
In particular, UDF III, UDF IV and UDF V failed to file a Form 10-Q. Previously, UDF IV had common shares traded on the NASDAQ Global Select Market under the symbol “UDF” beginning June 4, 2014. The NASDAQ halted trading on February 18, 2016 due to the company not submitting timely file audited financial statements. Further action was taken with a Form 25 to delist UDF IV on May 18, 2017.
Since August 22, 2018, the common stock of UDF IV was quoted on OTC Markets Inc. under the symbol “UDFI,” had four markets makers, and was not eligible for the “piggyback” exception of Exchange Act Rule 15c2-11(f)(3).
According to the SEC, “For this piggyback exception to apply, the security must have been the subject of quotation (exclusive of any identified customer interests) in the IDQS (“any system of general circulation to brokers or dealers which regularly disseminated quotations of identified brokers or dealers”) on each of at least 12 days within the previous 30 calendar days, with no more than 4 business days in succession without a quotation.”
Furthermore, UDF failed to file annual reports under the Exchange Act Section 13(a), under the Exchange Act Rule 13a-1 as well as quarterly reports under the Exchange Act Rule 13a-13.
On September 24th, 2018, UDF was ordered by the SEC to respond to these allegations within 10 days and then participate in a prehearing conference with the SEC’s Division of Enforcement with 14 days. The date of the public hearing before the Commission has yet to be determined.
