Item 8.01 Other Events.
As previously reported, the staff of the U.S. Securities and Exchange Commission
("SEC") has notified General Electric Company ("GE") that they are conducting an
investigation of GE's revenue recognition practices and internal controls over
financial reporting related to long-term service agreements. Following GE's
investor update in January 2018 about the increase in future policy benefit
reserves for GE Capital's run-off insurance operations, the SEC staff expanded
the scope of its investigation to encompass the reserve increase and the process
leading to the reserve increase. Following GE's announcement in October 2018
about the expected non-cash goodwill impairment charge related to GE's Power
business, the SEC expanded the scope of its investigation to include that charge
as well. We are providing documents and other information requested by the SEC
staff, and we are cooperating with the ongoing investigation.
On September 30, 2020, the SEC staff issued a "Wells notice" advising GE that it
is considering recommending to the SEC that it bring a civil injunctive action
against GE for possible violations of the securities laws. GE has been informed
that the issues the SEC staff may recommend that the SEC pursue relate to the
historical premium deficiency testing for GE Capital's run-off insurance
operations, as well as GE's disclosures relating to such run-off insurance
operations. The staff has not made a preliminary decision whether to recommend
any action with respect to the other matters under investigation.
The Wells notice is neither a formal allegation nor a finding of wrongdoing. It
allows GE the opportunity to provide its perspective and to address the issues
raised by the SEC staff before any decision is made by the SEC on whether to
authorize the commencement of an enforcement proceeding. GE disagrees with the
SEC staff with respect to this recommendation and will provide a response
through the Wells notice process. If the SEC were to authorize an action against
GE, it could seek an injunction against future violations of provisions of the
federal securities laws, the imposition of civil monetary penalties, and other
relief within the Commission's authority. The results of the Wells notice and
any enforcement action are unknown at this time.
(2)
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