Charter Communications fine overview:
- Who: Charter Communications settled accusations from the Securities and Exchanges Commission (SEC) by agreeing to pay a $25 million fine.
- Why: Charter Communications is accused of violating audit controls related to internal stock buyback.
- Where: The SEC fine for Charter Communications came from the SEC’s Washington, D.C. office.
Charter Communications agreed to a $25 million settlement after accusations from the Securities and Exchanges Commission (SEC) that the company violated audit control requirements related to stock buybacks.
Companies and individuals are protected from insider trading liability if they follow SEC rules on buyback programs, but those programs are not allowed to maintain the ability to change planned purchases or sales after the trading plan has been initiated.
“The SEC’s order finds that, from 2017 to 2021, Charter used plans that included ‘accordion’ provisions, which company personnel described as giving Charter flexibility, that allowed Charter to change the total dollar amounts available to buy back stock and to change the timing of buybacks after the plans took effect,” the SEC fine announcement says.
The SEC Charter Communications stock findings show that the company included accordion provisions in nine separate trading plans over the four-year period and those trading plans, then did not follow what Charter’s board had approved.
SEC found that Charter’s buyback accordion provision violated rule and occurred due to accounting control issues
The SEC’s Charter Communications fine findings show that the reason the stock buybacks with accordion provisions repeatedly occurred was the company’s insufficient internal accounting controls, which included an absence of reasonably designed controls to analyze whether the accordion provisions given to executives to alter the company’s trading was consistent with what its board had approved.
“Companies whose boards authorize buybacks using Rule 10b5-1 plans must have controls that reasonably assure that their trading plans meet all of the rule’s conditions,” Melissa Hodgman, Associate Director in the SEC’s Division of Enforcement, said in a statement. “This includes the fundamental requirement that, to benefit from the protection of Rule 10b5-1, traders have to relinquish their ability to influence the amount or timing of trades after their trading plans go into effect.”
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