What happened at GE in this case?
General Electric Company was listed on the New York Stock Exchange under the ticker GE. The SEC's order described its lines of business as including power, renewable energy, aviation and healthcare.[S1]
On Dec 9, 2020, the SEC (Securities and Exchange Commission, the US markets regulator) issued a settled order against GE. GE agreed to pay a $200 million penalty.[S1][S2]
The order covered 2015 through 2017. It found GE "failed to disclose material information to investors" about two business segments.[S1]
One was GE Power, which sold and serviced gas turbines. The other was an insurance business that had stopped taking on new policies around 2008.[S1]
GE consented to the order without admitting or denying its findings.[S1] This page tells the event from the filings and orders, in date order. It gives no view on the company, its people or its shares.
What did each filing and order say?
10-Q describes an insurance review[S3]
GE's quarterly report for the three months to Sep 30, 2017 said some long-term care insurance claims had run high. It said a full review of its assumptions would be finished in the fourth quarter. It said a charge "related to a probable deficiency is not reasonably estimable at September 30, 2017".
Insurance reserves raised by $8.9 billion[S4]
An 8-K said the review was complete. In the fourth quarter of 2017, GE added $8.9 billion to reserves for future claims. It also wrote off $0.6 billion. It estimated that GE Capital would need to put about $15 billion into the insurance business over seven years.
10-K discloses an SEC investigation[S5]
GE's annual report for 2017 said the SEC's Boston office had told it of an investigation in late November 2017. It covered revenue recognition and internal controls for long-term service agreements. After the Jan 16 update, the SEC staff widened it to the insurance reserve increase.
SEC staff sends a Wells notice[S6]
GE disclosed the notice in an 8-K on Oct 6, 2020. The staff was considering recommending a civil action over GE's past insurance testing and its insurance disclosures. GE said it disagreed and would respond. The 8-K also said the investigation was widened after GE's October 2018 announcement of a goodwill charge in Power, to include that charge.
SEC settled order and $200 million penalty[S1][S2]
The order found violations of the antifraud, reporting, disclosure controls and accounting controls provisions of the securities laws. GE agreed to stop any future violations and pay $200 million within 60 days. It also agreed to report to the SEC staff for one year. The order created a Fair Fund, so the penalty could be paid out to harmed investors.
GE's 8-K on the settlement[S7]
GE filed an 8-K the same day. It said the settlement "concludes and resolves the SEC investigation of GE in its entirety". It said no restatement of past financial statements was required, and that GE stood behind its financial reporting.
10-K records the payment[S8]
GE's annual report for 2020 said it paid the $200 million penalty in December 2020. It recorded $100 million at Corporate and $100 million at GE Capital.
SEC publishes a plan for the Fair Fund[S9]
The SEC's Division of Enforcement published a proposed plan to pay out the fund. It invited comments for 30 days.
SEC approves the distribution plan[S10]
The SEC approved the plan without changes. The plan pays investors for losses between Oct 16, 2015 and Jan 16, 2018, calculated under its own method.
What did the order say about GE Power's profits?
GE Power had service agreements with power plant operators lasting 15 to 30 years. Under them, GE maintained the turbines it had sold.[S1]
GE booked revenue on these contracts as it spent money on the work. It estimated a profit margin for the whole contract and applied it to the costs so far.[S1]
So when GE lowered its estimate of future costs, the margin rose. The order says the difference was booked as revenue and earnings in the period the estimate changed.[S1]
According to the order, such reductions added more than $1.4 billion to revenue and earnings in 2016. They added more than $1.1 billion in the first three quarters of 2017.[S1]
The order said these amounts were 29% and 45% of GE Power's reported segment profit in those periods.[S1]
It found that GE explained Power's profit changes with other items. Its 2016 10-K, for example, pointed mainly to an acquisition and lower material costs.[S1]
What did the order say about GE's cash flow measure?
GE reported "Industrial Cash Flow", a non-GAAP measure. That is a number a company defines itself, outside the US accounting rules (GAAP).[S1]
The measure showed the cash GE's industrial businesses produced, leaving out GE Capital, its finance arm.[S1]
In 2016 and 2017, GE Power sold more of the money its service customers owed it, mainly to GE Capital. Selling such receivables for cash now is called factoring.[S1]
GE called the new practice "deferred monetization". Before, it had sold amounts due within a year. Under the new practice, it sold unbilled amounts due up to five years out.[S1]
The order said the practice raised Industrial Cash Flow by more than $1.4 billion in 2016. It added more than $500 million in the first three quarters of 2017.[S1]
The cash came from later years. When GE stopped the practice in 2017, the order said, it had collected these amounts early.[S1]
Cash GE Power collected early through deferred monetization, by the year it was due
From the SEC order of Dec 9, 2020. Each bar is cash that would otherwise have come in that year or later.
$ million
Sources
In the Matter of General Electric Company: Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions (Securities Act Release No. 10899, Admin. Proc. File No. 3-20165), Dec 9, 2020 [S1]
See the numbers
The order found that GE's reports suggested it sold only short-term receivables, and that GE did not change that wording.[S1]
What did the order say about the insurance business?
GE reinsured long-term care policies written by other insurers. Reinsuring means taking on another insurer's risk. These policies pay for nursing homes and other care in old age.[S1]
Each year, GE ran a "loss recognition test". It checked whether its reserves, the money set aside for future claims, were enough.[S1]
The order said claims had run above GE's original projections for years. In 2015 and 2016, GE lowered its projected claims costs for the distant future.[S1]
In August 2016, the test first showed a shortfall of $178 million, the order said. A new method, called the "rollforward", turned it into a surplus of $86 million.[S1]
The order covered GE's 10-Ks and 10-Qs from the third quarter of 2015 to the first quarter of 2017. It found they left out known trends of rising claims costs and possible material losses.[S1]
The order cited Item 303 of Regulation S-K. As quoted there, it required a 10-K's management discussion to describe known trends likely to affect results materially.[S1]
What was in public filings before the order?
These are facts from the filings and the order.
- The insurance review. The order says GE disclosed a review of its insurance portfolio in July 2017.[S1] The 10-Q for Sep 30, 2017 said a charge could not yet be estimated.[S3]
- More insurance detail. In the same 10-Q, GE began giving detailed information on its long-term care exposure, the order says.[S1]
- The cost estimates. At a conference in November 2017, GE first told investors that cost-estimate changes had offset lower transaction volumes in 2014 to 2016.[S1]
- Deferred monetization. The order found GE did not describe it on earnings calls until the second quarter of 2017. That held even when analysts asked about cash flow.[S1]
- The measure itself. GE labeled Industrial Cash Flow as non-GAAP and published its own description of it.[S1] See non-GAAP measures for the SEC's rules on such numbers.
- The investigation. GE first described it under legal proceedings in its 10-K for 2017.[S5] It reported the Wells notice and the settlement in 8-Ks under Item 8.01, "Other Events".[S6][S7]
What did GE say about the findings?
GE's 8-K said it neither admitted nor denied the order's findings, in line with common SEC practice.[S7] The order says its findings are not binding on any other person or entity.[S1]
GE's 8-K said the order made no allegation that past financial statements were misstated. It said GE stood behind its financial reporting.[S7]
The order listed steps GE had taken. They included new management at the insurance and power units, revised disclosures and added controls on insurance testing.[S1]
Were there court cases on the same facts?
Yes. From November 2017, shareholders filed class actions against GE in federal court in New York. They were combined as the Sjunde AP-Fonden case.[S11]
They alleged securities law violations linked to insurance reserves and to accounting for long-term service agreements.[S11]
GE signed an agreement in December 2024 to settle for $362.5 million, subject to court approval.[S11] Its 10-K for 2025 said the case settled in April 2025.[S12]
That 10-K listed two shareholder derivative lawsuits as pending in New York state court. A derivative suit is brought by shareholders on the company's behalf.[S12]
It said both related to substantially the same facts as the class action.[S12] GE's 10-Q of Oct 20, 2026 did not report any change in them.[S13]
So, as of that filing, those two suits were before the courts. This page takes no view on them.
Where did the matter stand at the last document?
GE's 8-K of Dec 9, 2020 said the settlement closed the SEC's investigation of GE.[S7]
The SEC's page on the Fair Fund was last updated on Oct 7, 2022. It lists the plan approval of May 5, 2022 as the latest order.[S14]
By its 10-Q of Oct 20, 2026, General Electric Company operated as GE Aerospace.[S13]
Where do these kinds of documents appear?
- SEC orders. Settled orders appear on sec.gov under administrative proceedings, often with a press release.[S2] Fair Fund steps are listed under "Distributions to harmed investors".[S14]
- Investigations and lawsuits. A company describes them under legal proceedings in its 10-K, as GE did.[S5] See how to read a 10-K.
- Estimates behind the numbers. GE's 10-Q for Sep 30, 2017 described its insurance review.[S3] The order found its 10-Ks and 10-Qs from Q3 2015 to Q1 2017 left out known trends of rising claims costs.[S1]
- Non-GAAP measures. The order found GE broke Rule 100(b) of Regulation G. It bars a non-GAAP measure presented in a way that misleads.[S1]