December 11, 2020
WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission on Friday sued Sequential Brands Group Inc, accusing the brand management company of deceiving investors by failing to write down its goodwill fast enough after its stock price fell.
In a complaint filed in Manhattan federal court, the SEC said Sequential ignored internal calculations in 2016 that showed a writedown was needed.
It said this caused the New York-based company to overstate operating income, understate a reported net loss, and appear financially healthier to investors.
Sequential did not fix the problem until February 2018, according to the SEC, when it belatedly took a $304.1 million writedown.
The SEC accused Sequential of negligence-based fraud and other violations, and is seeking civil fines and injunctive relief.
Sequential did not immediately respond to requests for comment.
The company typically acquires brands, which include Jessica Simpson and Joe’s Jeans, and licenses them in exchange for fees.
“Sequential ignored clear evidence of goodwill impairment, and thereby delayed alerting investors to its declining economic prospects,” Melissa Hodgman, an SEC associate enforcement director, said in a statement.
(Reporting by Susan Heavey and Jonathan Stempel; Additional writing by Mohammad Zargham; Editing by Mark Potter, Kirsten Donovan)
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