(Reuters) – General Electric Co. has agreed to pay a $ 200 million penalty to settle fees for misleading investors over how they generated revenue in their power and insurance business, the Securities and Exchange Commission said Wednesday.
Securities regulators launched an investigation into GE's accounting policies after a $ 6.2 billion surprise fee in 2017 by the company, which said it would need to set aside $ 15 billion for long-term care insurance payments at the time.
The investigation, which initially focused on long-term service agreements for the maintenance of power plants, jet engines and other industrial equipment, was later extended to include GE's review of its insurance business.
As part of the settlement, GE has also agreed to report to the SEC over a one-year period on compliance related to its power operations and GE Capital's rounding insurance operations.
A GE representative said that the settlement has brought the SEC's investigation to an end, and no corrections or changes to its financial statements are required.
The representative said that it was in the best interests of GE and its shareholders to resolve, adding that the conglomerate has taken a number of steps to improve its disclosures and internal controls since the period covered by the investigation.
Most of GE's insurance business was abolished in Genworth Financial Inc. more than a decade ago, but it retained some of the older long-term care policy and also reinsures insurance. written by other insurers.
"It's never a proud moment for a company to have to wind up an SEC accounting investigation and pay a civil fine, but we believe this solution is a favorable outcome for GE," said Deane Dray, an analyst at RBC Capital Markets .
"It removes the overhang of the investigation," Dray said, adding that the SEC's fine was within the $ 1
The SEC also examined revenue recognition in the company's power operations, which led to a goodwill amortization of $ 22 billion in 2018.  In 2017 and 2018, the company's share price fell nearly 75% as the challenges in its power and insurance business were revealed to the public, the SEC said. .
The company misled investors by failing to explain that a quarter of its GE Power Profits in 2016 and nearly half in the first three quarters of 2017 were due to reductions in its previous cost estimates, the SEC said.
The order also shows that GE failed to tell investors that its reported increase in current industrial cash collections was coming at the expense of cash in the coming years, the SEC said.
“Public companies must give a correct picture of their activities. It's really very simple, "SEC chief executive Stephanie Avakian told reporters at a news conference on Wednesday.
" You need to talk exactly about how you meet financial goals and about trends and uncertainties that you know about your business. .
However, GE stated that it had neither acknowledged nor denied any allegations as part of the settlement. The SEC order also does not make any claim that financial reports for previous periods were incorrect, the company says.