ADT Is Fined $100,000 For Violating The SEC’s Exchange Act
ADT Inc. has been fined $100,000 by the U.S. Securities and Exchange Commission (SEC) for failure to report financial measures under Generally Accepted Accounting Principles (GAAP) while announcing its earnings results, according to an enforcement announcement released by the SEC on Dec. 26, 2018.
“ADT did not afford greater or equal prominence to comparable GAAP financial measures in two of its earnings releases containing non-GAAP financial measures,” the SEC’s enforcement announcement stated.
Section 13(a) of the SEC’s Exchange Act requires every issuer of a security registered pursuant to Section 12 of the Exchange Act to file annual, quarterly and current reports with the SEC. The Act also requires an issuer, when including a non-GAAP financial measure in a filing with the SEC, to include a presentation with equal or greater prominence of the most directly comparable financial measure calculated and presented in accordance with GAAP.
In its fiscal year 2017 earnings release and its first quarter 2018 earnings release, ADT provided non-GAAP financial measures such as adjusted EBITDA, adjusted net income and free cash flow before special items, without giving equal or greater prominence to the comparable GAAP financial measures, according to the SEC. As a result, ADT violated Section 13(a) of the Exchange Act.
The SEC is requiring ADT to cease and desist from committing or causing any future violations of Section 13(a) of the Exchange Act, and to pay the SEC $100,000 within 20 days.
“This is apparently a technical accounting violation, but the law is the law, and it appears to have been resolved amicably,” said Lessing E. Gold, SDM’s Security & the Law columnist.
ADT declined to comment on the penalties.