General Electric Headquarters in the United States

Infractions: General Electric agrees to pay $200m fine for misleading investors

*The company has been accused of ‘disclosure failures’, as the US Securities and Exchange Commission says GE did not adequately explain to stockholders that its insurance and power businesses had been deteriorating

Emmanuel Akosile | ConsumerConnect

For misleading investors in 2016 and 2017 about the company’s source of profitability in its power unit, the Securities and Exchange Commission (SEC), in the United States, has charged General Electric (GE).

It was learnt the company’s disclosure failures were reported to have caused financial problems in its insurance and power businesses prior to the tumbling of its stock.

The SEC Wednesday, December 9 stated that GE did not adequately explain to stockholders that its insurance and power businesses had been deteriorating, or about how cash flowed between its industrial and financial businesses.

The SEC, in its order, further accused GE of misleading investors in 2016 and 2017 about the source of profitability in its power unit.

The market regulatory agency disclosed that GE did not do a good enough job of explaining to investors the risks related to its portfolio of long-term health insurance liabilities between 2015 and 2017.

As regards, ‘disclosure failures’, report noted the company’s stock plunged nearly 76 percent from the beginning of 2016 through the end of 2018.

The SEC subsequently opened an investigation into the company’s accounting practices in 2017 after it recorded an accounting charge of $6.2 billion.

Now, GE has agreed to pay $200 million to settle the three-year investigation.

Stephanie Avakian, Director of the Division of Enforcement, in a statement said:  “Investors are entitled to an accurate picture of a company’s material operating results. “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.”

GE told Reuters that it’s “never a proud moment for a company to have to settle an SEC accounting investigation and pay a civil fine.”

However, officials said the company considers the settlement reached Wednesday to be a “favourable outcome for GE.”

Under the settlement in the US economy, the company does not have to admit wrongdoing or make any further corrections or revisions to financial statements.

Rather, GE will be required to report to the SEC on its accounting and disclosure controls for one year.

The company added: “We are pleased to have reached an agreement that puts the matter behind us.

“Under the current leadership team, we have significantly enhanced our disclosures and internal controls and are a stronger company today.”

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