U.S. securities regulators have settled allegations against movie company Lions Gate Entertainment Corp., which was accused of not properly disclosing efforts to thwart a hostile takeover.

The U.S. Securities and Exchange Commission (SEC) charged Lions Gate, which was founded in Vancouver and is now based in the U.S., with failing to fully and accurately disclose a key aspect of its effort to repel a hostile takeover bid from activist investor, Carl Ichan, back in 2010. The firm agreed to pay US$7.5 million and admit wrongdoing to settle the SEC’s charges.

According to the SEC’s order instituting settled administrative proceedings, Lions Gate’s management “participated in a set of extraordinary corporate transactions in 2010 that put millions of newly issued company shares in the hands of a management-friendly director.”

It says that one of the purposes of “the maneuver was to defeat a hostile tender offer by a large shareholder”; but that Lions Gate failed to reveal that this “was part of a defensive strategy to solidify incumbent management’s control, instead stating in SEC filings that the transactions were part of a previously announced plan to reduce debt.”

According to the SEC’s order, the company’s board of directors approved the transactions at a midnight board meeting in July 2010, while facing an imminent tender offer from Ichan. It says that the transactions allowed the friendly director to obtain control of approximately 9% of the company’s outstanding stock, effectively blocking the takeover bid. The SEC says that the company then failed to meet its disclosure obligations by failing to disclose the effort to foil the takeover bid in a press release and in SEC filings.

The SEC’s order finds that Lions Gate violated securities rules, and in addition to the financial penalty, the order requires the company to cease and desist from future violations.

“Lions Gate withheld material information just as its shareholders were faced with a critical decision about the future of the company,” said Andrew Ceresney, director of the SEC’s Division of Enforcement. “Full and fair disclosure is crucial in tender offers given that shareholders rely heavily on corporate insiders to make informed decisions, especially in the midst of tender offer battles.”