The SEC filed a case today against SafeNet, Inc., its former CEO and CFO, and three former SafeNet accountants. The SEC alleges that during the period from the fourth quarter of 2000 through May 2006, SafeNet engaged in two fraudulent schemes — one involving the backdating of options and the other earnings management. Each scheme allegedly resulted in SafeNet materially misstating its financial statements.
The SEC said that today’s case is the first enforcement action brought by the agency pursuant to Regulation G, which applies when “a company subject to the periodic reporting requirements under Section 13(a) or 15(d) of the Exchange Act of 1934, or a person acting on the company’s behalf, discloses publicly any material information that includes a ‘non-GAAP financial measure.'”
According to the SEC,
Non-GAAP financial measures, which are not calculated in conformity with Generally Accepted Accounting Principles, often exclude non-recurring, infrequent, or unusual expenses. Regulation G requires companies to reconcile the non-GAAP financial measure to the most directly comparable GAAP financial measure. Regulation G also prohibits companies and their employees from disseminating false or misleading non-GAAP financial measures or presenting the non-GAAP financial measures in such a manner that they mislead investors or obscure the company’s GAAP results.
All of the defendants have agreed to settle the actions against them.
Read the SEC Litigation Release
