General Electric has agreed to pay $ 200 million to resolve misleading Securities and Exchange Commission fees, the second such settlement by the company in just over a decade.
The US securities regulator said on Wednesday that GE had failed to inform investors of the measures it had used to improve cash flow and profits from its electricity business, and had hidden rising costs in its insurance business .
“It really is very simple: you have to talk precisely about how you are achieving financial goals and what trends and uncertainties you are aware of in your business,” said Stephanie Avakian, director of law enforcement at the SEC.
The SEC investigation came after GE disclosed in 2017 and 2018 its electricity and insurance business that lowered its stock price by 75%.
GE, which has neither admitted nor denied the SEC’s allegations, said on Wednesday that the regulation would not require revisions to its financial statements.
“We have concluded that it is in the best interests of GE and its shareholders to resolve this issue on the basis announced today,” a spokesperson said. Larry Culp, current CEO of GE, was appointed in October 2018, and the alleged disclosure failures took place between 2015 and 2017, when Jeff Immelt was CEO.
In addition to the fine, the regulation requires GE to cooperate with all potential SEC-related actions and to report to the regulator on its internal accounting controls over the next year.
In 2016 and 2017, GE reported to investors the increase in profits from its electrical business, GE Power, without disclosing that a significant portion of the profits came from reduced estimated costs for multi-year repairs and maintenance agreements with customers. buyers of electric turbines, the SEC alleged.
During those years, too, GE had reported an increase in cash flow, but failed to tell investors this was due to the sale of receivables to another GE unit, GE Capital. “They took from the future to profit from the present,” Ms. Avakian said.
In GE’s insurance business, the company failed in 2015 and 2016 to disclose “the increase in claims costs and the potential for significant insurance losses,” the SEC said in its order.
This is not the first time the SEC has alleged material problems with GE’s financial statements. In 2009, the regulator fined GE $ 50 million for using “inappropriate accounting methods” to increase profits and revenues in order to “avoid reporting negative financial results.” GE also neither admitted nor denied the allegations in this case.
Shares of GE fell about 1 percent on the stock market after Wednesday’s announcement.