A California-based manufacturer of smart windows avoided civil penalties after self-reporting apparent disclosure violations to the Securities and Exchange Commission (SEC).

View failed to disclose $28 million in projected warranty-related liabilities to address defects in its products, the SEC said in a press release Monday. The agency declined to fine the company because of the latter’s prompt remediation and cooperation.

View’s former Chief Financial Officer Vidul Prakash, however, faces SEC charges for his alleged failure to ensure disclosure of the warranty-related liabilities. The agency’s complaint against Prakash, filed in U.S. District Court for the Northern District of California, seeks permanent injunctions, civil penalties, and an officer-and-director bar.

The details: Filings by View from December 2020 to May 2021 disclosed warranty liabilities ranging from $22 million to $25 million for manufacturing replacement windows to address defects, according to the SEC’s order. The company allegedly omitted the costs of shipping and installing the windows, which should have been disclosed in line with generally accepted accounting principles.

As a result, total warranty liabilities disclosed should have been between approximately $48 million to $53 million, the SEC said. The omissions resulted in material misstatements for fiscal years 2019 and 2020 and the first quarter of 2021.

The SEC found View violated the negligence-based antifraud, proxy disclosure, reporting, books and records, internal accounting controls, and disclosure controls provisions of federal securities laws. Without admitting or denying the findings, View agreed to cease and desist from future violations.

Compliance considerations: View self-reported to the SEC in August 2021 its audit committee was “conducting an investigation into the adequacy of the company’s previously disclosed warranty liability,” according to the order.

The SEC noted View further cooperated by providing agency staff with:

  • Explanations and summaries of specific factual issues at all stages of the investigation;
  • Financial analyses from an outside consulting firm about the recorded warranty liabilities and other related issues; and
  • Key documents and witnesses staff had not yet identified.

View also implemented new disclosure and warranty liability controls, hired a new CFO and other senior accounting staff, and implemented enhanced training for its finance and accounting personnel.

“[A]s this resolution demonstrates, there are real benefits to parties that meaningfully cooperate with the SEC’s investigations, including reduced penalties or even no penalties at all,” said Monique Winkler, director of the SEC’s San Francisco regional office, in the release.

View did not respond to a request for comment.

Jeff Dale is Managing Editor, Editorial Projects and Analytics, at Compliance Week. He previously served as Compliance Week's Digital Editor and has worked as a copy editor at the Boston Herald and city editor at The Hour Publishing Co. in Norwalk, Conn.View full Profile

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