GE has agreed to pay a $200m penalty to settle a case taken by US authorities alleging “disclosure failures” in its power and insurance businesses.
The US Securities and Exchange Commission claimed the manufacturer “misled investors” by describing profits from its power arm “without explaining that one quarter of profits in 2016 and nearly half in the first three quarters of 2017 stemmed from reductions in its prior cost estimates”.
Investigators also alleged that GE failed to tell investors that its reported increase in current industrial cash collections was coming at the expense of cash in future years and came primarily from internal receivable sales between GE Power and GE’s financial services business GE Capital.
The SEC’s order found that GE violated the antifraud, reporting, disclosure controls, and accounting controls provisions of securities laws.
As well as the penalty, GE has agreed to cease and desist from future violations and report for a one-year period to the SEC regarding certain accounting and disclosure controls the power and insurance businesses.
The agreement was reached without the US manufacturer admitting or denying the SEC’s findings.
“Investors are entitled to an accurate picture of a company’s material operating results,” said Stephanie Avakian, director of the SEC enforcement division.
“GE’s repeated disclosure failures across multiple businesses materially misled investors about how it was generating reported earnings and cash growth as well as latent risks in its insurance business.”
In a filing, GE pointed out the SEC order makes no allegation that prior period financial statements were misstated.
“This settlement does not require corrections or restatements of GE’s previously reported financial statements, and GE stands behind its financial reporting,” said the company.
“GE cooperated with the SEC over the course of its investigation.”
The company added it has taken a number of steps since the time periods covered by the investigation to enhance its investor disclosures regarding power and insurance trends and risks.