Clothing Retailer Settles Charges for Undisclosed CEO Perquisites

A fashion retailer settled SEC charges for failing to disclose certain personal benefits paid on behalf of its CEO in its proxy statements. 

According to the Order, the company failed to disclose $979,269 worth of benefits, mainly related to chartered airline flights, paid on behalf of the CEO. The SEC found that the company "incorrectly viewed the CEO's business expenses to include expenses associated with the CEO's personal flights, including transportation, meals, and hotel." The SEC found that the company failed to disclose these expenses as "perquisites."

The SEC highlighted that, in 2023, the company filed revised disclosures regarding perquisites and personal benefits provided to the CEO for prior fiscal years. The SEC noted that the company disclosed that the CEO voluntarily reimbursed the company approximately $454,000 for private air travel and expenses that were determined to be perquisites or personal expenses.

The SEC determined that the company violated Exchange Act Sections 13(a) ("Periodical and other reports") and 14(a) ("Proxies") and Rules 12b-20 ("Additional information"), 13a-1 ("Requirements of annual reports"), 13a-15(a) ("Controls and procedures"), 14a-3 ("Information to be furnished to security holders") and 14a-9 ("False or misleading statements") thereunder.

To settle the charges, the company agreed to cease and desist from committing further violations. No civil monetary penalty was imposed because the SEC found that the company (i) acted promptly to ensure that outside counsel conducted an internal investigation after learning of potential misconduct; (ii) self-reported its disclosure failures before completing its internal investigation; (ii) cooperated with the SEC investigation; and (iv) implemented remedial measures.