2023-09-27 SEC Press pdf 193 KB 18,929 chars

In re Cumberland

Exhibit of SEC Charges Corporate Insiders for Failing to Timely Report Transactions and Holdings

summary

Cumberland Pharmaceuticals Inc. agreed to a cease-and-desist order and paid a $200,000 civil penalty to resolve SEC charges for negligently causing over 150 late Form 4 filings by insiders and failing to disclose these delinquencies in its proxy statements and annual reports from 2009 through 2021, violating Sections 13(a) and 16(a) of the Securities Exchange Act.

paragraph

Cumberland Pharmaceuticals Inc. violated Sections 13(a) and 16(a) of the Securities Exchange Act by failing to ensure timely filings of insider ownership reports (Forms 3, 4, and 5) and omitting required disclosures about delinquent filings in its proxy statements and annual reports between 2009 and 2021. Despite voluntarily undertaking to assist insiders with filings, the company’s negligent procedures led to over 150 late Form 4 filings between May 2019 and April 2022, with no proof of scienter required for liability. As part of a settlement, Cumberland paid a $200,000 civil penalty, agreed to a cease-and-desist order, and committed not to seek penalty offsets in related investor lawsuits without repaying any such amounts to the SEC.

narrative

Cumberland Pharmaceuticals Inc. agreed to a cease-and-desist order and paid a $200,000 civil penalty to resolve SEC charges for violating Sections 13(a) and 16(a) of the Securities Exchange Act. Between 2009 and 2021, the company failed to disclose delinquent insider filings in its proxy statements and annual reports, in violation of Item 405 of Regulation S-K, despite being required to report such delinquencies. Although insiders are ultimately responsible for timely Form 3, 4, and 5 filings, Cumberland voluntarily assumed responsibility for preparing and submitting these reports on their behalf, yet its inadequate internal controls led to over 150 late Form 4 filings between May 2019 and April 2022. The SEC found that Cumberland’s negligence directly caused these violations, even though scienter was not required to establish liability. The company’s failure to meet the two-business-day deadline for Form 4 filings and its omission of required disclosures constituted material breaches of federal reporting obligations. As part of the settlement, Cumberland consented to the order without admitting or denying the findings, except for jurisdiction and subject matter, and agreed not to seek penalty offsets in any related investor lawsuits unless it repaid any recovered amounts to the SEC. The SEC emphasized that issuers who take on fiduciary-like responsibilities for insider reporting must exercise due diligence to ensure compliance.

Enriched metadata

Scheme: corporate-fraud (95%)
Court: District of Columbia
Outcome: settled
Civil penalty: $200,000
Victim loss: $10,000
Ticker: CPIX

Classified corporate-fraud(confidence 95%). EDGAR detection: forms 10-K/10-Q/8-K· recall 56% / precision 8%. detection rule →

Extracted insights

Dollar amounts 2

$200K $200,000 $100K–$1M
$10K $10,000 $10K–$100K

Entities 3

company Cumberland Pharmaceuticals Inc. ×2
person disclosure obligations
agency Securities and Exchange Commission

Triples 8

SEC Institutes Cease-and-Desist Proceedings
SEC Deems Appropriate Cease-and-Desist Proceedings
Cumberland Pharmaceuticals Inc. Submitted Offer of Settlement
SEC Accepted Offer of Settlement
Cumberland Pharmaceuticals Inc. Consents to Entry of Order
SEC Finds Violations of Reporting Requirements
Cumberland Pharmaceuticals Inc. Officers and Directors Violated Section 16(a)
Cumberland Pharmaceuticals Inc. Failed to Comply with Disclosure Obligations

PDF

In re Cumberland · Source

Text layers

Extracted body text (18,929c)

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 34-98553 / September 27, 2023

ADMINISTRATIVE PROCEEDING
File No. 3-21738

In the Matter of

Cumberland
Pharmaceuticals Inc.,

Respondent.

ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTION 21C OF THE SECURITIES
EXCHANGE ACT OF 1934, MAKING
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER

I.
The Securities and Exchange Commission (“Commission”) deems it appropriate that
cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the
Securities Exchange Act of 1934 (“Exchange Act”), against Cumberland Pharmaceuticals Inc.
(“Cumberland” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the
findings herein, except as to the Commission’s jurisdiction over Respondent and the subject
matter of these proceedings, which are admitted, Respondent consents to the entry of this Order
Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange
Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth
below.

III.
On the basis of this Order and Respondent’s Offer, the Commission finds
1
that:
Summary
1. These proceedings arise out of violations of the issuer reporting requirements and
beneficial ownership reporting requirements of the federal securities laws.
2. Section 16(a) of the Exchange Act and the rules promulgated thereunder require
officers and directors of a company with a class of equity security registered under Section 12 of the
Exchange Act, and any beneficial owners of greater than 10% of such class (collectively,
“insiders”), to file certain reports of securities holdings and transactions. Section 16(a) was
motivated by a belief that “the most potent weapon against the abuse of inside information is full
and prompt publicity” and by a desire “to give investors an idea of the purchases and sales by
insiders which may in turn indicate their private opinion as to prospects of the company.” H.R.
Rep. 73-1383, at 13, 24 (1934). Reflecting this informational purpose, the obligation to file applies
irrespective of profits or the filer’s reasons for engaging in the transactions. The Sarbanes-Oxley
Act of 2002 and Commission implementing regulations accelerated the reporting deadline for most
transactions to two business days and mandated that all reports be filed electronically on EDGAR to
facilitate rapid dissemination to the public.
3. Reporting issuers are required to disclose in the proxy statement for the issuer’s
annual meeting, or its annual report, Section 16 reporting delinquencies by its insiders. Although
insiders remain responsible for the timeliness and accuracy of their required Section 16(a) reports,
the Commission has encouraged the practice of many issuers to “help their [officers and directors]
or submit the [] filings on their behalf . . . [in order] to facilitate accurate and timely filing.”
Mandated Electronic Filing and Website Posting for Forms 3, 4 and 5, SEC Release No. 34-47809
(May 7, 2003), 68 Fed. Reg. 25788, 25789 (May 13, 2003).
4. Since 2009, Respondent has been a reporting issuer and its insiders have been
required to file Section 16(a) reports. On numerous occasions, Respondent’s officers and
directors violated Section 16(a) by failing to timely file required reports. Respondent failed to
comply with its disclosure obligations to report such delinquencies. In addition, Respondent was
a cause of many of the Section 16(a) violations by its officers and directors as a result of
Respondent’s negligence in performing certain tasks it voluntarily agreed to undertake in
connection with the preparation and filing of Section 16(a) reports on their behalf.
Respondent
5. Cumberland is a Tennessee corporation with its principal place of business in
Tennessee. Cumberland’s common stock is and has been at all relevant times registered with the

1
The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on
any other person or entity in this or any other proceeding.

Commission under Section 12 of the Exchange Act and trades on the NASDAQ stock market
(ticker: CPIX). Cumberland is required to file annual reports on Form 10-K pursuant to Section
13(a) of the Exchange Act and Rule 13a-1 thereunder.
Applicable Legal Framework
6. Pursuant to Section 16(a) and Rule 16a-3, insiders are required to file initial
statements of holdings on Form 3 and keep this information current by reporting transactions on
Forms 4 and 5. Specifically, within 10 days after becoming an insider, or on or before the effective
date of the Section 12 registration of the class of equity security, an insider must file a Form 3 report
disclosing his or her beneficial ownership of all securities of the issuer. To keep this information
current, insiders must file Form 4 reports disclosing transactions resulting in a change in beneficial
ownership within two business days following the execution date of the transaction, except for
limited types of transactions eligible for deferred reporting. Transactions required to be reported on
Form 4 include purchases and sales of securities, exercises and conversions of derivative securities,
and grants or awards of securities from the issuer. In addition, insiders are required to file a Form 5
report within 45 days after the issuer’s fiscal year-end to report any transactions or holdings that
should have been, but were not, reported on Form 3 or 4 during the issuer’s most recent fiscal year
and any transactions eligible for deferred reporting (unless the corporate insider has previously
reported all such transactions). Insiders are required to file the reports electronically on EDGAR.
There is no state of mind requirement for violations of Section 16(a) and the rules thereunder.
2

7. Section 13(a) of the Exchange Act requires issuers that have securities registered
pursuant to Section 12 of the Exchange Act to file such periodic and other reports as the
Commission may prescribe and in conformity with such rules as the Commission may promulgate.
Exchange Act Rule 13a-1 requires such issuers to file annual reports with the Commission
containing specified information. In 1991, the Commission adopted Item 405 of Regulation S-K to
help address compliance with Section 16(a) by requiring reporting issuers to disclose in annual
proxy and information statements or annual reports information regarding delinquent Section
16(a) filings by insiders.
3

2
See, e.g., SEC v. e-Smart Technologies, Inc., 82 F. Supp. 3d 97, 104 (D.D.C. 2015) (scienter is not required
to establish a violation of Section 16(a) of the Exchange Act); cf. Oppenheimer & Co., Inc., 47 SEC 286, 1980 WL
26901, at *2 (May 19, 1980) (“We have previously held that the failure to make a required report, even though
inadvertent, constitutes a willful violation”); SEC Release No. 34-47809, 68 Fed. Reg. at 25792 (noting that an
issuer’s eligibility for temporary relief from disclosing Forms 4 filed one business day late by its insiders “does not
change the fact that any Form 3, 4 or 5 filed later than the applicable due date violates Section 16(a)”) (emphasis
added). Negligence is sufficient to establish liability for causing such violations. See KPMG Peat Marwick LLP, 74
SEC Docket 357, 2001 WL 47245, at *19 (Jan. 19, 2001) (“[N]egligence is sufficient to establish ‘causing’ liability
under Exchange Act Section 21C(a) ... in cases in which a person is alleged to ‘cause’ a primary violation that does
not require scienter.”).
3
Ownership Reports and Trading by Officers, Directors and Principal Security Holders, SEC Release 34-
28869, 56 Fed. Reg. 7242, 7259-60 (Feb. 21, 1991); 17 C.F.R. § 229.405. The Commission amended Item 405 in
FAST Act Modernization and Simplification of Regulation S-K, SEC Release 33-10618 (Mar. 20, 2019), 84 Fed.

8. Item 405 of Regulation S-K specifically requires an issuer to disclose any late
filing or known failure by an insider to file a report required by Section 16(a). In determining
whether such disclosure is required, the issuer may rely on a review of the Forms 3 and 4 filed
during the most recent fiscal year, and Forms 5 filed with respect to the most recent fiscal year,
by the issuer’s insiders. Section 16(a) reports are posted on EDGAR, and thus are readily
available to issuers to evaluate their timeliness. A “known” failure to file includes, but is not
limited to, a failure to file a Form 3, which is required of all insiders, and a failure to file a Form
5 in the absence of a written representation that no Form 5 is required, unless the issuer
otherwise knows that no Form 5 is required. The Item 405 disclosure of any late filings or
known failures to file must (i) identify by name each insider who failed to file on a timely basis
Forms 3, 4, or 5 during the most recent fiscal year or prior fiscal years and (ii) set forth the
number of late reports, the number of late-reported transactions, and any known failure to file.
An issuer does not have an obligation under Item 405 to research or make inquiry regarding
delinquent Section 16(a) filings beyond the review specified in the item.
9. An issuer that files annual reports with the Commission on Form 10-K, such as
Respondent, is required to include the Item 405 disclosure in its Form 10-K, or incorporate by
reference to its Form 10-K the Item 405 disclosure made in the issuer’s definitive proxy or
information statement for its annual meeting of shareholders for the election of directors, if that
definitive proxy or information statement is filed with the Commission not later than 120 days
after the end of the fiscal year covered by the Form 10-K. To the extent disclosure is required by
Item 405, materially false, misleading, or omitted Item 405 disclosures constitute a violation of
Section 13(a) of the Exchange Act and Rule 13a-1. No showing of scienter is necessary to
establish a violation of Section 13(a).
4

Respondent Failed to Comply with Item 405 Disclosure Requirements
10. As an issuer required to file annual reports on Form 10-K, Respondent is and has
been at all relevant times required to disclose information concerning delinquent Section 16(a)
filings by its insiders to the extent required by Item 405 of Regulation S-K.
11. Respondent failed to do so for multiple fiscal years, including:
a. Respondent failed to make the required Item 405 disclosure for its 2019
fiscal year, improperly omitting any disclosure. An issuer may only omit the disclosure if there
are no Section 16(a) delinquencies to report. In fact, during such fiscal year, multiple
Cumberland insiders filed numerous untimely required Section 16(a) reports, which Respondent
was required to disclose pursuant to Item 405. Respondent was required to review the forms
filed and identify by name each insider who failed to file on a timely basis and set forth the

Reg. 12674 (Apr. 2, 2019), which among other things, permits an issuer to omit the disclosure if there are no Section
16(a) delinquencies to report.

4
SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998).

number of late reports and the number of transactions that were not reported on a timely basis,
which Respondent failed to do.
b. Respondent failed to make the required Item 405 disclosure for its 2020
fiscal year, improperly omitting any disclosure. An issuer may only omit the disclosure if there
are no Section 16(a) delinquencies to report. In fact, during such fiscal year, multiple
Cumberland insiders filed numerous untimely required Section 16(a) reports, which Respondent
was required to disclose pursuant to Item 405. Respondent was required to review the forms
filed and identify by name each insider who failed to file on a timely basis and set forth the
number of late reports and the number of transactions that were not reported on a timely basis,
which Respondent failed to do.
c. Respondent failed to make the required Item 405 disclosure for its 2021
fiscal year, improperly omitting any disclosure. An issuer may only omit the disclosure if there
are no Section 16(a) delinquencies to report. In fact, during such fiscal year, multiple
Cumberland insiders filed numerous untimely required Section 16(a) reports, which Respondent
was required to disclose pursuant to Item 405. Respondent was required to review the forms
filed and identify by name each insider who failed to file on a timely basis and set forth the
number of late reports and the number of transactions that were not reported on a timely basis,
which Respondent failed to do.
12. As a result of the conduct described above, Respondent failed to comply with its
disclosure obligation to the extent required by Item 405 and violated Section 13(a) of the
Exchange Act and Rule 13a-1 thereunder.
Respondent Was a Cause of Certain Violations of Section 16(a) by its Insiders
13. Although the Commission encourages the practice of many issuers to assist insiders
in complying with Section 16(a) filing requirements, issuers who voluntarily accept certain
responsibilities and then act negligently in the performance of those tasks may be liable as a cause
of Section 16(a) violations by insiders.
14. Since at least 2019, Respondent has voluntarily agreed with its officers and
directors to perform certain tasks in connection with the filing of Section 16(a) reports on their
behalf, including the preparation and filing of all such reports for which Respondent had timely
notification of the required information concerning the transactions. However, on multiple
occasions, Respondent acted negligently in its performance of such tasks and was a cause of
Cumberland’s officers and directors failing to file Section 16(a) reports on a timely basis. The
procedures and practices employed by Respondent were insufficient to the extent that those
practices resulted in the recurrent failure to meet the two-business day filing deadline.
15. For example, between May 2019 and April 2022, Respondent’s officers and
directors in the aggregate filed more than 150 untimely Forms 4 to report transactions related to,
among other things, officer and director stock awards, smaller purchases that aggregated to more
than $10,000 for certain insiders, and open-market sales. For virtually all of these late-reported

transactions, Respondent had received timely notification of or otherwise possessed the necessary
information for such filings but failed to prepare and file the reports within the required time frame.
16. As a result of the conduct described above, Respondent was a cause of certain
violations of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder by Respondent’s
insiders.
Respondent’s Remedial Efforts
17. In determining to accept the Offer, the Commission considered certain remedial
acts undertaken by Respondent and cooperation afforded to Commission staff.
IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent’s Offer.

Accordingly, it is hereby ORDERED that:

A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from
committing or causing any violations and any future violations of Sections 13(a) and 16(a) of the
Exchange Act and Rules 13a-1 and 16a-3 promulgated thereunder.

B. Respondent shall, within 14 days of the entry of this Order, pay a civil money
penalty in the amount of $200,000 to the Securities and Exchange Commission, for transfer to
the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3)
. If
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.
Payment must be made in one of the following ways:
(1) Respondent may transmit payment electronically to the Commission, which will
provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov through
the SEC website at http://www.sec.gov/about/offices/ofm.htm; or

(3) Respondent may pay by certified check, bank cashier’s check, or United States
postal money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to:

Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying
Cumberland Pharmaceuticals Inc. as a Respondent in these proceedings, and the file number of
these proceedings; a copy of the cover letter and check or money order must be sent to Thomas
Smith, Associate Regional Director, Division of Enforcement, Securities and Exchange
Commission, 100 Pearl Street, Suite 20-100, New York, NY 10004.

C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall
be treated as penalties paid to the government for all purposes, including all tax purposes. To
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any
award of compensatory damages by the amount of any part of Respondent’s payment of a civil
penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such
a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order
granting the Penalty Offset, notify the Commission’s counsel in this action and pay the amount
of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be
deemed an additional civil penalty and shall not be deemed to change the amount of the civil
penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action”
means a private damages action brought against Respondent by or on behalf of one or more
investors based on substantially the same facts as alleged in the Order instituted by the
Commission in this proceeding.

By the Commission.

Vanessa A. Countryman
Secretary

OCR text (18,980c · tika · 95% conf)

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 34-98553 / September 27, 2023

ADMINISTRATIVE PROCEEDING
File No. 3-21738

In the Matter of

Cumberland
Pharmaceuticals Inc.,

Respondent.

ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTION 21C OF THE SECURITIES
EXCHANGE ACT OF 1934, MAKING
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER

The Securities and Exchange Commission (“Commission”) deems it appropriate that
cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the
Securities Exchange Act of 1934 (“Exchange Act”), against Cumberland Pharmaceuticals Inc.
(“Cumberland” or “Respondent”).

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the
findings herein, except as to the Commission’s jurisdiction over Respondent and the subject
matter of these proceedings, which are admitted, Respondent consents to the entry of this Order
Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange
Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth
below.

III.

On the basis of this Order and Respondent’s Offer, the Commission finds1 that:

Summary

1. These proceedings arise out of violations of the issuer reporting requirements and
beneficial ownership reporting requirements of the federal securities laws.

2. Section 16(a) of the Exchange Act and the rules promulgated thereunder require
officers and directors of a company with a class of equity security registered under Section 12 of the
Exchange Act, and any beneficial owners of greater than 10% of such class (collectively,
“insiders”), to file certain reports of securities holdings and transactions. Section 16(a) was
motivated by a belief that “the most potent weapon against the abuse of inside information is full
and prompt publicity” and by a desire “to give investors an idea of the purchases and sales by
insiders which may in turn indicate their private opinion as to prospects of the company.” H.R.
Rep. 73-1383, at 13, 24 (1934). Reflecting this informational purpose, the obligation to file applies
irrespective of profits or the filer’s reasons for engaging in the transactions. The Sarbanes-Oxley
Act of 2002 and Commission implementing regulations accelerated the reporting deadline for most
transactions to two business days and mandated that all reports be filed electronically on EDGAR to
facilitate rapid dissemination to the public.

3. Reporting issuers are required to disclose in the proxy statement for the issuer’s
annual meeting, or its annual report, Section 16 reporting delinquencies by its insiders. Although
insiders remain responsible for the timeliness and accuracy of their required Section 16(a) reports,
the Commission has encouraged the practice of many issuers to “help their [officers and directors]
or submit the [] filings on their behalf . . . [in order] to facilitate accurate and timely filing.”
Mandated Electronic Filing and Website Posting for Forms 3, 4 and 5, SEC Release No. 34-47809
(May 7, 2003), 68 Fed. Reg. 25788, 25789 (May 13, 2003).

4. Since 2009, Respondent has been a reporting issuer and its insiders have been
required to file Section 16(a) reports. On numerous occasions, Respondent’s officers and
directors violated Section 16(a) by failing to timely file required reports. Respondent failed to
comply with its disclosure obligations to report such delinquencies. In addition, Respondent was
a cause of many of the Section 16(a) violations by its officers and directors as a result of
Respondent’s negligence in performing certain tasks it voluntarily agreed to undertake in
connection with the preparation and filing of Section 16(a) reports on their behalf.

Respondent

5. Cumberland is a Tennessee corporation with its principal place of business in
Tennessee. Cumberland’s common stock is and has been at all relevant times registered with the

1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on
any other person or entity in this or any other proceeding.

Applicable Legal Framework

6. Pursuant to Section 16(a) and Rule 16a-3, insiders are required to file initial
statements of holdings on Form 3 and keep this information current by reporting transactions on
Forms 4 and 5. Specifically, within 10 days after becoming an insider, or on or before the effective
date of the Section 12 registration of the class of equity security, an insider must file a Form 3 report
disclosing his or her beneficial ownership of all securities of the issuer. To keep this information
current, insiders must file Form 4 reports disclosing transactions resulting in a change in beneficial
ownership within two business days following the execution date of the transaction, except for
limited types of transactions eligible for deferred reporting. Transactions required to be reported on
Form 4 include purchases and sales of securities, exercises and conversions of derivative securities,
and grants or awards of securities from the issuer. In addition, insiders are required to file a Form 5
report within 45 days after the issuer’s fiscal year-end to report any transactions or holdings that
should have been, but were not, reported on Form 3 or 4 during the issuer’s most recent fiscal year
and any transactions eligible for deferred reporting (unless the corporate insider has previously
reported all such transactions). Insiders are required to file the reports electronically on EDGAR.
There is no state of mind requirement for violations of Section 16(a) and the rules thereunder.2

2 See, e.g., SEC v. e-Smart Technologies, Inc., 82 F. Supp. 3d 97, 104 (D.D.C. 2015) (scienter is not required
to establish a violation of Section 16(a) of the Exchange Act); cf. Oppenheimer & Co., Inc., 47 SEC 286, 1980 WL
26901, at *2 (May 19, 1980) (“We have previously held that the failure to make a required report, even though
inadvertent, constitutes a willful violation”); SEC Release No. 34-47809, 68 Fed. Reg. at 25792 (noting that an
issuer’s eligibility for temporary relief from disclosing Forms 4 filed one business day late by its insiders “does not
change the fact that any Form 3, 4 or 5 filed later than the applicable due date violates Section 16(a)”) (emphasis
added). Negligence is sufficient to establish liability for causing such violations. See KPMG Peat Marwick LLP, 74
SEC Docket 357, 2001 WL 47245, at *19 (Jan. 19, 2001) (“[N]egligence is sufficient to establish ‘causing’ liability
under Exchange Act Section 21C(a) … in cases in which a person is alleged to ‘cause’ a primary violation that does
not require scienter.”).

3 Ownership Reports and Trading by Officers, Directors and Principal Security Holders, SEC Release 34-
28869, 56 Fed. Reg. 7242, 7259-60 (Feb. 21, 1991); 17 C.F.R. § 229.405. The Commission amended Item 405 in
FAST Act Modernization and Simplification of Regulation S-K, SEC Release 33-10618 (Mar. 20, 2019), 84 Fed.

9. An issuer that files annual reports with the Commission on Form 10-K, such as
Respondent, is required to include the Item 405 disclosure in its Form 10-K, or incorporate by
reference to its Form 10-K the Item 405 disclosure made in the issuer’s definitive proxy or
information statement for its annual meeting of shareholders for the election of directors, if that
definitive proxy or information statement is filed with the Commission not later than 120 days
after the end of the fiscal year covered by the Form 10-K. To the extent disclosure is required by
Item 405, materially false, misleading, or omitted Item 405 disclosures constitute a violation of
Section 13(a) of the Exchange Act and Rule 13a-1. No showing of scienter is necessary to
establish a violation of Section 13(a).4

Respondent Failed to Comply with Item 405 Disclosure Requirements

10. As an issuer required to file annual reports on Form 10-K, Respondent is and has
been at all relevant times required to disclose information concerning delinquent Section 16(a)
filings by its insiders to the extent required by Item 405 of Regulation S-K.

11. Respondent failed to do so for multiple fiscal years, including:

a. Respondent failed to make the required Item 405 disclosure for its 2019
fiscal year, improperly omitting any disclosure. An issuer may only omit the disclosure if there
are no Section 16(a) delinquencies to report. In fact, during such fiscal year, multiple
Cumberland insiders filed numerous untimely required Section 16(a) reports, which Respondent
was required to disclose pursuant to Item 405. Respondent was required to review the forms
filed and identify by name each insider who failed to file on a timely basis and set forth the

Reg. 12674 (Apr. 2, 2019), which among other things, permits an issuer to omit the disclosure if there are no Section
16(a) delinquencies to report.

4 SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998).

number of late reports and the number of transactions that were not reported on a timely basis,
which Respondent failed to do.

b. Respondent failed to make the required Item 405 disclosure for its 2020
fiscal year, improperly omitting any disclosure. An issuer may only omit the disclosure if there
are no Section 16(a) delinquencies to report. In fact, during such fiscal year, multiple
Cumberland insiders filed numerous untimely required Section 16(a) reports, which Respondent
was required to disclose pursuant to Item 405. Respondent was required to review the forms
filed and identify by name each insider who failed to file on a timely basis and set forth the
number of late reports and the number of transactions that were not reported on a timely basis,
which Respondent failed to do.

c. Respondent failed to make the required Item 405 disclosure for its 2021
fiscal year, improperly omitting any disclosure. An issuer may only omit the disclosure if there
are no Section 16(a) delinquencies to report. In fact, during such fiscal year, multiple
Cumberland insiders filed numerous untimely required Section 16(a) reports, which Respondent
was required to disclose pursuant to Item 405. Respondent was required to review the forms
filed and identify by name each insider who failed to file on a timely basis and set forth the
number of late reports and the number of transactions that were not reported on a timely basis,
which Respondent failed to do.

12. As a result of the conduct described above, Respondent failed to comply with its
disclosure obligation to the extent required by Item 405 and violated Section 13(a) of the
Exchange Act and Rule 13a-1 thereunder.

Respondent Was a Cause of Certain Violations of Section 16(a) by its Insiders

13. Although the Commission encourages the practice of many issuers to assist insiders
in complying with Section 16(a) filing requirements, issuers who voluntarily accept certain
responsibilities and then act negligently in the performance of those tasks may be liable as a cause
of Section 16(a) violations by insiders.

14. Since at least 2019, Respondent has voluntarily agreed with its officers and
directors to perform certain tasks in connection with the filing of Section 16(a) reports on their
behalf, including the preparation and filing of all such reports for which Respondent had timely
notification of the required information concerning the transactions. However, on multiple
occasions, Respondent acted negligently in its performance of such tasks and was a cause of
Cumberland’s officers and directors failing to file Section 16(a) reports on a timely basis. The
procedures and practices employed by Respondent were insufficient to the extent that those
practices resulted in the recurrent failure to meet the two-business day filing deadline.

15. For example, between May 2019 and April 2022, Respondent’s officers and
directors in the aggregate filed more than 150 untimely Forms 4 to report transactions related to,
among other things, officer and director stock awards, smaller purchases that aggregated to more
than $10,000 for certain insiders, and open-market sales. For virtually all of these late-reported

16. As a result of the conduct described above, Respondent was a cause of certain
violations of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder by Respondent’s
insiders.

Respondent’s Remedial Efforts

17. In determining to accept the Offer, the Commission considered certain remedial
acts undertaken by Respondent and cooperation afforded to Commission staff.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in Respondent’s Offer.

Accordingly, it is hereby ORDERED that:

B. Respondent shall, within 14 days of the entry of this Order, pay a civil money

penalty in the amount of $200,000 to the Securities and Exchange Commission, for transfer to
the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.
Payment must be made in one of the following ways:

(1) Respondent may transmit payment electronically to the Commission, which will
provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov through
the SEC website at http://www.sec.gov/about/offices/ofm.htm; or

(3) Respondent may pay by certified check, bank cashier’s check, or United States
postal money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to:

Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying

Cumberland Pharmaceuticals Inc. as a Respondent in these proceedings, and the file number of
these proceedings; a copy of the cover letter and check or money order must be sent to Thomas
Smith, Associate Regional Director, Division of Enforcement, Securities and Exchange
Commission, 100 Pearl Street, Suite 20-100, New York, NY 10004.

C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall

be treated as penalties paid to the government for all purposes, including all tax purposes. To
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any
award of compensatory damages by the amount of any part of Respondent’s payment of a civil
penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such
a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order
granting the Penalty Offset, notify the Commission’s counsel in this action and pay the amount
of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be
deemed an additional civil penalty and shall not be deemed to change the amount of the civil
penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action”
means a private damages action brought against Respondent by or on behalf of one or more
investors based on substantially the same facts as alleged in the Order instituted by the
Commission in this proceeding.

By the Commission.

Vanessa A. Countryman
Secretary

Respondent