General Electric said in a filing Tuesday it’s been notified by the Securities and Exchange Commission that the agency may take civil action against the struggling industrial conglomerate for possible violations of securities laws following a two-year investigation.
According to the filing, SEC staff issued a Wells Notice to GE on September 30 in connection with possible violations of securities laws, specifically with respect to lending arm GE Capital’s accounting practices for certain insurance operations, as well as the relevant disclosures.
A Wells notice is not a formal allegation nor a finding of wrongdoing, but rather a notification from the SEC that the regulator is preparing to bring a civil enforcement action or administrative proceeding against a company; it gives the target of the probe an opportunity to respond before the SEC makes a final determination.
GE stock took a hit on Tuesday after the announcement, ending the day down 3.7%.
The SEC is still investigating GE for a slew of other alleged accounting malpractices, including its revenue recognition practices and handling of financial reporting related to long-term service agreements.
SEC staff has yet to recommend any action with respect to other matters under investigation, the filing notes.
GE says it is cooperating with the ongoing investigation.
The Tuesday filing is the latest development in a mess of regulatory scrutiny that GE has faced since at least 2009, when the firm agreed to pay $50 million to settle SEC charges alleging it misled investors by reporting false and misleading results in its financial statements. The current investigation dates back to a January 2018 financial disclosure, in which GE revealed a $6.2 billion insurance loss dating back more than a decade–an event that triggered the SEC’s investigation by the following week. The Tuesday filing notes that the investigation’s scope was broadened at least twice after additional GE disclosures.
Under Armour is another highly scrutinized firm to receive a Wells notice this year. On July 22, the firm disclosed it received the notice in connection to accounting practices in disclosures stretching from the third quarter of 2015 through the period ending December 31, 2016. A filing the following month revealed that the SEC moved forward with the recommended civil action, but no further disclosures have been made in the matter.
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