The Securities and Exchange Commission under President Trump isn’t known for its aggressiveness. As a Reuters analysis recently highlighted, the nation’s “top market cop is slowly taking the shackles off corporations,” in the hope that relaxed regulation will help reverse a 20-year decline in the number of U.S. public company listings.
But we’re glad to see the SEC’s enforcement division has been hard at work in Indiana in the past year, most recently at Calumet Specialty Products Partners, the Indianapolis-based maker of petroleum products.
Last month, Calumet announced it had agreed to pay a $250,000 penalty to settle charges that it violated federal securities laws when it issued an earnings release in March 2018 that portrayed its full-year 2017 financial performance as being better than it actually was.
The issue traces back to September 2017. That’s when Calumet moved to a new enterprise resource planning system, which caused numerous disruptions to the company’s operating and reporting activities.
According to the SEC, Calumet’s interim controller, internal audit and compliance director, and financial planning manager all left the company from September to December 2017.
As a result of these disruptions, Calumet filed its third-quarter 2017 earnings report seven weeks late.
By mid-February, the SEC says, Calumet had not announced when it expected to issue its next earnings release, spawning questions from investors, analysts and the media.
Those pressures led Calumet to issue earnings on March 8, even though it was still having challenges with its planning system, the SEC said.
The whole episode might sound like small potatoes, but tough enforcement helps ensure the integrity of U.S. financial markets—something that benefits all investors.
It’s not just about the specific company that might be in the SEC’s crosshairs at any given time. It’s about the message enforcement actions send to potential bad actors across the state and country.
In other enforcement actions in the state in recent years, the message sent has been decidedly mixed. Probes by the Justice Department and SEC paved the way for a settlement last spring under which Indianapolis-based Celadon Group agreed to pay a whopping $42 million to settle accounting fraud charges.
On the other hand, critics proested last year after former executives of Carmel-based ITT Educational Services were able to settle SEC accounting-fraud charges for just $300,000.
It doesn’t always require SEC involvement to ferret out dubious financial practices—a point driven home this fall by the chorus of investor criticisms of the disclosures in the IPO prospectus for the parent company of WeWork, which ultimately was forced to abandon its plans. Keen-eyed investors also raised questions early on about the bookkeeping at ITT and Celadon.
But to get to the bottom of accounting shenanigans, there is no substitute for the SEC’s power to issue subpoenas. When the SEC exercises that authority to expose questionable behavior, the investing public is well served.•
__________
To comment on this editorial, write to ibjedit@ibj.com.
Please enable JavaScript to view this content.