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ARTICLE · 05 FEBRUARY 2021

Executives Settle SEC Charges For Accounting Violations

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SEC Charges Former Executives of San Francisco Bay Area Company with Accounting Violations.

United StatesCorporate/Commercial Law
Hogan Lovells Cadwalader
Hogan Lovells Cadwalader
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The former CEO and chief financial officer ("CFO") of a Flexible Spending Account services company settled SEC charges for making material misstatements and omissions that resulted in the company's improper recognition of revenue.

In its Order, the SEC found that the CEO and CFO instructed the company's accounting staff and external auditor to recognize anticipated revenue from a large public-sector client despite the client communicating to the company that the client would not pay for certain development and transition work in connection with the contract. The SEC found that, even after the company's accounting staff and external auditor questioned the status of the supposed revenue, the CEO and CFO failed to disclose that the client denied owing the amounts. As a result, the company overstated its revenue in its 2016 Q2, Q3 and year-end financial statements, and the company's 2017 public offering referenced the year-end financial statement with the overstated

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