General Electric shares edged higher Wednesday, but trailed broader market gains as investors reacted to the possibility of legal action linked to a Securities & Exchange Commission probe into some of its accounting practices.



a sign on the side of a building: General Electric Gets SEC Wells Notice Amid Insurance Accounting Probe


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General Electric Gets SEC Wells Notice Amid Insurance Accounting Probe

GE said Tuesday that it had received a so-called Wells Notice from the SEC that indicate authorities are looking into how the industrial group accounted for the run-off of some of its legacy insurance businesses that sat inside its GE Capital division.

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The SEC probe was triggered by a January 2018 move to take a $6.2 billion charge to its fourth-quarter earnings linked to weakness in its North American Life & Health insurance portfolio under then-CEO John Flannery.

GE also said at the time that GE Capital, its financing arm, would make $15 billion payments over the next seven years in order to shore up NALH’s statutory reserves, starting with around $3 billion in the first quarter of this year, and approximately $2 billion annually from 2019 to 2024.

“The Wells notice is neither a formal allegation nor a finding of wrongdoing. It allows GE the opportunity to provide its perspective and to address the issues raised by the SEC staff before any decision is made by the SEC on whether to authorize the commencement of an enforcement proceeding,” the company said in a statement Tuesday. “GE disagrees with the SEC staff with respect to this recommendation and will provide a response through the Wells notice process.”

“If the SEC were to authorize an action against GE, it could seek an injunction against future violations of provisions of the federal securities laws, the imposition of civil monetary penalties, and other relief within the Commission’s authority,” the company added. “The results of the

General Electric  (GE) – Get Report shares edged higher Wednesday, but trailed broader market gains as investors reacted to the possibility of legal action linked to a Securities & Exchange Commission probe into some of its accounting practices.

GE said Tuesday that it had received a so-called Wells Notice from the SEC that indicate authorities are looking into how the industrial group accounted for the run-off of some of its legacy insurance businesses that sat inside its GE Capital division.

The SEC probe was triggered by a January 2018 move to take a $6.2 billion charge to its fourth-quarter earnings linked to weakness in its North American Life & Health insurance portfolio under then-CEO John Flannery. 

GE also said at the time that GE Capital, its financing arm, would make $15 billion payments over the next seven years in order to shore up NALH’s statutory reserves, starting with around $3 billion in the first quarter of this year, and approximately $2 billion annually from 2019 to 2024.

“The Wells notice is neither a formal allegation nor a finding of wrongdoing. It allows GE the opportunity to provide its perspective and to address the issues raised by the SEC staff before any decision is made by the SEC on whether to authorize the commencement of an enforcement proceeding,” the company said in a statement Tuesday. “GE disagrees with the SEC staff with respect to this recommendation and will provide a response through the Wells notice process.”

“If the SEC were to authorize an action against GE, it could seek an injunction against future violations of provisions of the federal securities laws, the imposition of civil monetary penalties, and other relief within the Commission’s authority,” the company added. “The results of the Wells notice and any enforcement action are unknown

Topline

General Electric said in a filing Tuesday it’s been notified by the Securities and Exchange Commission that the agency may take civil action against the struggling industrial conglomerate for possible violations of securities laws following a two-year investigation.

Key Facts

According to the filing, SEC staff issued a Wells Notice to GE on September 30 in connection with possible violations of securities laws, specifically with respect to lending arm GE Capital’s accounting practices for certain insurance operations, as well as the relevant disclosures.

A Wells notice is not a formal allegation nor a finding of wrongdoing, but rather a notification from the SEC that the regulator is preparing to bring a civil enforcement action or administrative proceeding against a company; it gives the target of the probe an opportunity to respond before the SEC makes a final determination.

GE stock took a hit on Tuesday after the announcement, ending the day down 3.7%.

The SEC is still investigating GE for a slew of other alleged accounting malpractices, including its revenue recognition practices and handling of financial reporting related to long-term service agreements.

SEC staff has yet to recommend any action with respect to other matters under investigation, the filing notes.

GE says it is cooperating with the ongoing investigation.

Key Background

The Tuesday filing is the latest development in a mess of regulatory scrutiny that GE has faced since at least 2009, when the firm agreed to pay $50 million to settle SEC charges alleging it misled investors by reporting false and misleading results in its financial statements. The current investigation dates back to a January 2018 financial disclosure, in which GE revealed a $6.2 billion insurance loss dating back more than a decade–an event that triggered the SEC’s investigation by the

The number of confirmed cases of the coronavirus that causes COVID-19 worldwide rose above 34 million on Thursday with the U.S. accounting for about a fifth of that total, as Dr. Anthony Fauci hit back at claims made by President Donald Trump during Tuesday’s presidential debate on face masks.



a man wearing a suit and tie: Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases


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Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases

Trump said Fauci, who is head of the Institute for Allergies and Infectious Diseases, said “masks are not good — and then changed his mind.” In a podcast recorded for ABC News, Fauci refuted that claim.

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“Anybody who has been listening to me over the last several months knows that a conversation does not go by where I do not strongly recommend that people wear masks,” he said. The podcast will be available in full on Thursday, according to ABC.

Fauci reminded listeners that early on in the pandemic, he and other health experts recommended against face masks out of concerns there would be a shortage for frontline workers, but later changed that view once it was clear the virus was transmissible by asymptomatic patients.

“I have been on the airways, on the radio, on TV, begging people to wear masks,” said Fauci. “And I keep talking in the context of: Wear a mask, keep physical distance, avoid crowds, wash your hands and do things more outdoors versus indoors.”

Experts are dismayed at how face masks have become politicized during the crisis, with Trump and Vice President Mike Pence frequently appearing in public without one, and holding political rallies where few in attendance wear them either.

Yet the White House is quietly encouraging state governors to implement mask mandates and even to impose fines on those who refuse to wear them, according to

Insurance companies are getting even more time to implement a new rule for valuing long-term contracts following a vote by the Financial Accounting Standards Board on Wednesday.

The rule maker, which sets accounting standards for companies and nonprofits in the U.S., in June proposed a delay of another year for the new rule amid the economic harm caused by the coronavirus pandemic. The rule was first delayed by a year last November to give companies more time to modernize their processes for reporting and valuation.

Insurance firms must review assumptions used to measure the value of their long-term contractual obligations and make revisions if needed. Long-term contracts include agreements on annuities, endowments and title insurance. Short-duration contracts usually cover property and liability protection.

Publicly listed insurers, excluding small ones, may now delay implementing the new standard until after Dec. 15, 2022. All others are allowed to wait until after Dec. 15, 2024.

Insurance companies in comment letters to FASB said a delay would give them time to address coronavirus hurdles and adequately prepare for the new standard by, for example, testing internal controls and educating management and investors.

Columbus, Ga.-based insurer

Aflac Inc.

was prepared for another potential delay in the new standard, Chief Financial Officer Max Brodén said. Challenges stemming from the pandemic have forced Aflac to revise its business goals and timelines, including for issues such as implementing new accounting rules, Chief Accounting Officer June Howard wrote in an Aug. 6 letter to FASB.

Principal Financial Group Inc.,

a Des Moines, Iowa-based insurer, is currently developing new valuation models and will update its actuarial systems to comply with the new rule, finance chief Deanna Strable-Soethout said. The delay