United Development Funding IV (NASDAQ: UDF), a former non-traded real estate investment trust, announced that its shares will be delisted from NASDAQ effective today. The company said it plans to appeal the decision.
UDF IV, which went public in June 2014, was out of compliance with NASDAQ rules for failing to file its 2015 annual report and subsequent quarterly reports with the Securities and Exchange Commission. The company received an October 17th extension to file the missing reports and regain compliance, but missed the deadline. According to the company, it was unable to meet the extended deadline because “the trust’s auditors required more time to complete the audit.” NASDAQ halted trading of UDF shares in February 2016.
The company also disclosed that it received a “Wells notice” from the SEC’s enforcement division stating that its staff may recommend that the SEC file an enforcement action against the company for alleged violations to the Securities Act of 1933 and the Securities Exchange Act of 1934. Unnamed individuals associated with the company and its advisor also received similar Wells notices.
A Wells notice is not a formal allegation or a finding of wrongdoing, but is a preliminary determination that the SEC sends to individuals or firms when it is planning to bring an enforcement action against them. UDF IV plans to respond to the notice and explain its belief that no enforcement action is warranted against it or any individuals associated with the company and its advisor.
Late last year, UDF IV publicly disclosed that it was the subject of an SEC investigation when responding to then-anonymous allegations that it was operating as a Ponzi-like scheme. Kyle Bass, hedge fund manager and founder of Hayman Capital Management, accused the firm of using new investor money to pay existing investors. Hayman currently maintains a short position in the common stock of United Development Funding IV.
Less than two weeks after the Ponzi allegations came to light, the FBI raided UDF’s corporate headquarters and seized multiple boxes of evidence. UDF IV has denied the Ponzi allegations since the beginning. In May, the company announced that its audit committee commissioned an independent investigation of its documents, records, communications and personnel which found no evidence of fraud.
United Development Funding IV invests in secured loans to acquire and develop land into single-family homes and single-family home lots, mainly in the North Texas/Dallas-Fort Worth area.