September 28, 2022

Aircraft Company Agrees to Pay $200 Million for Misleading Investors over Safety Concerns

An aircraft industry company settled charges for making material misleading statements to the public regarding a recently developed airplane model's safety.

In the Order, the SEC found that, following two separate crashes involving the new aircraft model, the company issued a series of statements through its then CEO, reassuring the public that the aircraft was safe. According to the Order, the former top executive allegedly said that the model was tested rigorously to meet federal and company standards, and that the company had taken all proper precautions when developing the aircraft. The SEC found that the company began remediation efforts on the defective features related to the crash when it made those statements. According to the Order, during this time, the company learned of disclosure failures and other inconsistencies related to its submissions to the Federal Aviation Administration in connection with the aircraft's approval; however, it continued to offer and sell debt securities to investors.

The SEC found that the company failed to ensure its statements were not materially misleading under the circumstances disclosed to investors. The company did not admit or deny the allegations.

The SEC determined that the company and its CEO violated Securities Act Section 17(a)(2)-(3) ("Fraudulent interstate transactions"). In addition to a monetary penalty of $200 million, the company agreed to cease and desist from actions that cause further violations of federal securities laws. The company's former CEO agreed to a separate $1 million civil monetary penalty.

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