Four public companies agreed to settle SEC charges of failing to keep internal control over financial reporting ("ICFR") for consecutive annual reporting periods.

According to the SEC orders, each of the companies had disclosed material weaknesses in ICFR in their financial statements, but failed to remediate these weaknesses after being contacted by SEC staff. Specifically, the SEC alleged that:

  • Grupo Simec S.A.B. de C.V. ("Grupo") (see here for the SEC Order) failed to remediate material deficiencies in ICFR for 10 consecutive annual reporting periods from 2008 to 2017, and failed to complete the mandated management evaluation of internal controls for certain periods. To settle the charges, Grupo agreed to pay a $200,000 civil penalty.
  • Lifeway Foods, Inc. ("Lifeway") (see here for the SEC Order) failed to establish and implement ICFR for 10 consecutive annual reporting periods, and announced three financial statement restatements during the period from 2007 to 2016. Similar to Grupo, the SEC alleged that Lifeway failed to complete the required evaluation of the internal controls for specific periods. To settle the charges, Lifeway agreed to pay a $100,000 civil penalty.
  • Digital Turbine Inc. ("Digital") (see here for the SEC Order) failed to create and implement sufficient ICFR for seven consecutive annual reporting periods from 2011 to 2017. To settle the charges, Digital agreed to pay a $100,000 civil penalty.
  • Cytodyn Inc. ("Cytodyn") (see here for the SEC Order) failed to create and implement effective ICFR for nine consecutive annual reporting periods from 2008 to 2016. To settle the charges, Cytodyn agreed to pay a $35,000 civil penalty.

The SEC investigation was conducted by the Division of Enforcement's Financial Reporting and Audit Group. In determining the settlement, the SEC took into consideration the remedial acts undertaken by all four public companies.

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