SEC Fines The Cheesecake Manufacturing unit for Deceptive Buyers on COVID-19 Enterprise Influence

The U.S. Securities and Exchange Commission stated on Friday it had fined restaurant chain The Cheesecake Manufacturing unit $125,000 to settle costs that it misled buyers in regards to the impression of the pandemic on its enterprise, the primary such case introduced by the regulator.

In March 23 and April 3 regulatory filings, the corporate stated its eating places have been “working sustainably” when in reality inner paperwork confirmed it was dropping roughly $6 million per week as a consequence of pandemic lockdowns and had solely about 16 weeks’ of money remaining, the SEC stated.

Though the corporate didn’t disclose this info with public buyers, it did share it with potential personal fairness buyers and lenders because it sought further liquidity, the SEC stated. The regulator’s probe additionally discovered that The Cheesecake Manufacturing unit didn’t disclose in its March submitting that it had already knowledgeable its landlords that it could not pay lease in April because of the hurt COVID-19 had inflicted on its enterprise.

The corporate stated in an announcement that it had “absolutely cooperated with the SEC,” and neither admitted nor denied its allegations.

Whereas Friday’s penalty is small, it underscores the regulatory dangers COVID-19 has created for public corporations wrestling with how finest to speak the pandemic’s impression, with white collar crime legal professionals predicting comparable SEC actions.

Final Could the SEC had requested public corporations that took emergency pandemic support to show they certified for the funds and had made constant representations to buyers about their want for the help.

“When public corporations describe for buyers the impression of COVID-19 on their enterprise, they need to converse precisely,” stated SEC Director of Enforcement Stephanie Avakian.

“The Enforcement Division… will proceed to scrutinize COVID-related disclosures to make sure that buyers obtain correct, well timed info, whereas additionally giving applicable credit score for immediate and substantial cooperation in investigations.”