Shares of General Electric Drop After Disclosure of Notice from SEC

General Electric announced this week that it has received a Wells notice from staff at the Securities and Exchange Commission (SEC) tied to an investigation of the company’s accounting practices.

The Wells notice warns GE that the SEC could bring a civil action against the company for allegedly violating securities laws. While a Wells notice is not a formal allegation or a finding of wrongdoing, it provides GE with an opportunity to address the issues raised by the SEC staff.

According to the securities filing Tuesday, the notice was received on September 30th over the company’s accounting for reserves related to a legacy insurance business. The Wall Street Journal first reported the news.

“GE disagrees with the SEC staff with respect to this recommendation and will provide a response through the Wells notice process,” the company’s filing added.

The filing read: “GE has been informed that the issues the SEC staff may recommend that the SEC pursue relate to the historical premium deficiency testing for GE Capital’s run-off insurance operations, as well as GE’s disclosures relating to such run-off insurance operations. The staff has not made a preliminary decision whether to recommend any action with respect to the other matters under investigation.”

GE’s accounting had been investigated by the SEC and the Justice Department in 2018 after the company revealed big write-downs in a run-off insurance business and its core power business.

GE had said it is cooperating with the ongoing investigation.

GE said that potential action by the SEC could include civil fines, an injunction against future violations of federal securities laws and “other relief” within the agency’s authority.

“The results of the Wells notice and any enforcement actions are unknown at this time,” the company said.

In 2009 the agency had also charged GE with accounting fraud, finding that it “misled investors by reporting materially false and misleading results.” The company had settled these charges by agreeing to pay a $50 million penalty.

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