misled

General Electric Fined $200 Million By SEC For Misleading Investors

The Securities and Exchange Commission has fined General Electric $ 200 million to pay off fraudulent investments in connection with its electricity and insurance businesses.

General Electric Misled Investors

The SEC said it had found that GE misled investors in 2016 and 2017 about the source of profits in its GE Power business, one of the company’s key operations.

The company also failed to fully inform investors of the risks associated with GE Capital, its financial services arm, between 2015 and 2017, the SEC said.

The resolution overturned the SEC’s annual investigation into bad business practices under the former conglomerate’s leadership team.

Under CEO Larry Culp, management is now trying to get back on track after years of decline. The company, which made a name for itself by selling lightbulbs, now makes everything from large items to aircraft parts and medical devices. It also has strong, digital and financial arms.

SEC’s Statement

“Investors are entitled to a more accurate picture of the company’s operating results,” Stephanie Avakian, director of the SEC enforcement agency, said in a statement. “GE’s repeated failure to disclose to many businesses has misled investors in the way it generates reported revenue and financial growth and hidden risks in its insurance business.”

GE shares fell by about 75% in 2017 and 2018 as the disclosure was made public, the SEC said. The company resolved the charges and agreed to pay the civil fine without the consent or denial of the findings, the SEC said.

Avakian said during a press conference that GE “failed to disclose details about how it earned more than $ 1 billion in its reported profits in two different years.” He further added that the company had withdrawn $ 2.5 billion in revenue which was supposed to be up to the next five years “on sales receivable from another company under GE.”

“And at a higher level, GE has misled investors by failing to disclose trends that are getting worse and the potential need for additional funding to pay for the high expected losses,” he said. “Taken together, these disclosures could lead to a misleading picture of GE’s general business situation at the time.”

Avakian said the SEC also found inequalities in financial management and internal GE financial disclosures. The commission found that GE made misleading statements and omissions to investors’ salary calls, industrial conferences and “its occasional meetings with the SEC,” Avakian said.

General Electric’s Response

The company also agreed to report to the SEC for one year its policies and policy management and financial disclosures, the commission said.

A spokesman for GE in a statement sent to CNBC said it was “in the best interest of GE and shareholders to resolve the matter on the basis of the announcement announced today,” adding that the company had not acknowledged or denied the commission’s allegations.

Watch CNBC's full interview with General Electric CEO Larry Culp

“Today’s announcement brings all aspects of GE’s SEC investigative work, and no adjustment or revision of our financial statements is required,” a spokesman for the organization said.

This resolution puts an end to the SEC’s long-running investigation into bad business practices under the former conglomerate leadership team. Under CEO Larry Culp, management is now trying to get back on track after years of decline. The company, which made a name for itself by selling lightbulbs, now makes everything from large items to aircraft parts and medical devices. It also has power, digital and financial diversity. The company also agreed to report to the SEC for one year on its policies and controls for accounting and disclosure.

GE shares fell by more than 1% on Wednesday after trading hours in the news after finishing the day by about 4%.

Synopsis

The Securities and Exchange Commission has fined General Electric $ 200 million to pay off a fine for misleading the investors in connection with its electricity (power) and insurance businesses.

The SEC said it had found that GE misled investors in 2016 and 2017 about the source of profits in its GE Power business, one of the company’s key operations.

The company also failed to fully inform investors of the risks associated with GE Capital, its financial services arm, between 2015 and 2017, the SEC said.

Shaheer Ansari

Shaheer is passionate about living a life seeking un-ending knowledge, philomath, as you may think of him. He's a student of Finance and a keen observer of Business and Indian-Political scenario who takes pleasure to pen down his views and opinions on the same. As his guiding mantra to life, ‘Come what may , life goes on’ helps.

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