Company Settles SEC Charges for Material Misrepresentations in Financial Statements

A motor vehicle manufacturer based in Michigan (the "Company") settled SEC charges for material misstatements in its financial statements.

As described in the SEC Order, the agency found that the Company failed to estimate "incurred but not reported" ("IBNR") liability for future asbestos claims and, as a result, violated SEC reporting requirements. The Company had previously been named a defendant in personal injury lawsuits involving exposure to asbestos-containing automotive parts. From 2004 to 2015, the Company disclosed that losses from future asbestos claims were possible, but that it was unable to reasonably estimate the loss amount. According to the SEC, the Company failed to conduct any substantive analysis of its potential liability despite having sufficient data to do so and, instead, relied on untested assumptions to conclude that it could not estimate its IBNR liability. The SEC found that this error resulted in the Company's financial statements being materially misstated. The SEC found the Company in violation of the reporting requirements under Exchange Act Section 13(a) and the books and records and accounting obligations under Section 13(b).

To settle the charges, the Company agreed to (i) cease and desist from further violations of securities regulations and (ii) pay a civil money penalty of $950,000.