Shares of General Electric were moving lower Tuesday in response to the company receiving a Wells Notice from the Securities and Exchange Commission.
What Happened: General Electric GE received a Wells Notice from SEC on Sept. 30, the company said in an 8-K filing Tuesday.
The SEC notified General Electric that they are investigating revenue recognition practices over financial reporting related to long-term service agreements.
A Wells Notice is “a letter sent by a securities regulator to a prospective respondent, notifying him of the substance of charges that the regulator intends to bring against the respondent,” according to Cornell Law.
Why It’s Important: The SEC has been investigating General Electric since 2018 over its long-term care insurance business and premium collections.
General Electric announced in 2018 that it was taking a $6.2-billion after-tax charge in the fourth quarter and contributing $15 billion over the next seven years to shore up its portfolio’s reserves.
The SEC is considering recommending a civil injunctive action against General Electric for “possible violations of the securities law,” according to the 8-K.
“We are providing documents and other information requested by the SEC staff, and we are cooperating with the ongoing investigation,” GE said.
General Electric said in the filing they disagree with the SEC staff recommendation “and will provide a response through the Wells notice process.”
The SEC could impose “civil monetary penalties and other relief within the Commission’s authority.”
GE Price Action: General Electric shares were trading down by 4.29% to $6.14 at last check Tuesday.
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