Future FinTech Group (FTFT) agreed to pay $1.65 million to settle charges levied by the Securities and Exchange Commission (SEC) for filing materially inaccurate annual reports and failing to maintain adequate books, records, and internal control over financial reporting (ICFR).
FTFT, formerly doing business as China-based SkyPeople Fruit Juice, agreed to a cease-and-desist order and to retain an independent compliance consultant to test, assess, and review its internal accounting controls and ICFR, the SEC said in an administrative proceeding Monday.
The details: From fiscal years 2016-18, FTFT logged significant impairment losses on its assets. The SEC’s investigation found the company’s assets should have been impaired in larger amounts earlier.
The agency, in its order, detailed setbacks at certain of FTFT’s operating subsidiaries, including Huludao Wonder, Suizhong Project, Guo Wei Mei, and Yingkou. Had impairment losses at the subsidiaries been disclosed properly, the company’s financial statements for FYs 2016 and 2017 “should have included losses that were not taken until later years, and the financial statements for fiscal years 2017 and 2018 included losses that should have been taken in earlier years,” the SEC said.
Starting in FY2016, 17 out of 21 FTFT quarterly filings have disclosed material ICFR weaknesses, primarily because of a lack of accounting personnel with necessary U.S. reporting expertise, the order stated.
Compliance considerations: FTFT must retain an independent compliance consultant within 60 days to test, assess, and review its internal accounting controls and ICFR.
The consultant will review the “implementation, effectiveness, and sufficiency of FTFT’s internal accounting controls,” per the order.
FTFT did not respond to a request for comment. The company agreed to the settlement without admitting wrongdoing.