Under Armour, Kevin Plank get notice SEC could take enforcement action against apparel maker

Under Armour and two top executives, including founder Kevin A. Plank, have been alerted that the SEC has been advised to take enforcement action against the company as part of an investigation into its accounting practices.

The staff of the U.S. Securities and Exchange Commission sent “Wells Notices” to the company as well as to Plank, executive chairman and brand chief, and David E. Bergman, chief financial officer, on July 22, the sports apparel brand announced Monday.

A Wells Notice is neither a formal charge of wrongdoing or a final determination of any violations of law. The notices say the SEC staff has made a preliminary determination recommending that the SEC file an enforcement action against the company and each of the executives alleging violations of federal securities laws.

Under Armour confirmed last November that its accounting methods are being investigated by the SEC. Federal officials have reportedly been looking into whether the company manipulated its sales numbers to make them appear stronger.

The notices relate to the company’s disclosures of its “pull-forward” sales in connection to revenue from the third quarter of 2015 through Dec. 31, 2016, Under Armour said in an SEC filing. A pull-forward sale typically includes a customer sale that occurs earlier than originally planned. The SEC is looking at disclosures of the use of pull forward sales to meet sales objectives.

“The SEC Staff has not alleged any revenue recognition or other violations of generally accepted accounting principles relating to that or any other period,” Under Armour said in its SEC filing.

Shares of Under Armour fell more than 3.7% in pre-market trading Monday.

“The Company and the Executives maintain that their actions were appropriate and intend to pursue the Wells Notice process, which will include the opportunity to respond to the SEC Staff’s position, and also expect to engage in a dialogue with the SEC Staff to work toward a resolution of this matter,” Under Armour said in its filing Monday.

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