GE Reaches $200 Million Settlement With SEC for Misleading Investors
On Wednesday, the SEC announced that GE agreed to pay a $200 million penalty to settle misleading investors' case, according to Reuters.
The Securities and Exchange Commission had been investigating whether General Electric had misled customers regarding its earnings generations from its power and insurance businesses. GE shares fell in the post-market but were up slightly intraday on Thursday.
Regulators started investigating GE after an audit of the company's accounting practice contained a charge of $6.2 billion in 2017. GE had stated that it would need $15 billion for long-term care insurance payouts during that time. The investigation was initially targeting long-term service agreements for maintenance of power plants, jet engines, and other equipment, but was later expanded to GE's insurance division.
In addition to the $200 million penalty, GE also must report compliance from its power business and insurance operations to the SEC for one-year. The settlement brought the investigation to a close. GE has reportedly implemented new steps to improve its internal controls.
“It is never a proud moment for a company to have to settle an SEC accounting investigation and pay a civil fine, but we do consider this settlement to be a favorable outcome for GE,” said Deane Dray, an analyst at RBC Capital Markets.
“It removes the overhang of the investigation,” said Dray. “We believe investors recognize that these legacy accounting issues literally date back two CEOs ago.”
“Public companies must provide an accurate picture of their business. It’s really very simple,” SEC enforcement chief Stephanie Avakian said on Wednesday. “You must speak accurately, about the manner in which you are meeting financial targets and about trends and uncertainties, you are aware of in your business.”