The Securities and Exchange Commission recently settled charges with an organic foods producer over allegations of accounting and control errors tied to sales incentives.

Most noteworthy about the case, however, is the SEC’s determination to levy no civil penalty, crediting the company with its prompt internal investigation, self-reporting, and significant remedial measures. The SEC issued the typical cease-and-desist order with no other penalty attached.

John Nowak, a partner in the law firm Paul Hastings, along with associate Jeanette Kang, called out the enforcement action, describing it as a “rare departure from typical practice” for the SEC. “Similarly situated companies should certainly consider this result in deciding whether to conduct an internal inquiry into potential accounting and sales issues and ultimately whether to self-report to the SEC,” Nowak and Kang wrote.

The case surrounds end-of-quarter sales incentives at New York-based Hain Celestial Group, a producer of organic foods and personal care products. From 2014 through 2016, the company attributed 30 percent of its U.S. revenue to two distributors, where end-of-quarter sales incentives ultimately led to aggressive revenue recognition, according to the SEC’s enforcement order.

When the company’s finance department learned in May 2016 that the company had granted extended payment terms to one of the distributor’s end-of-quarter sales for March 2016, the staff escalated the matter to the audit committee, which investigated. By August, the company reported its investigation to the SEC, filed a Form 8-K to alert the market, and delayed its fiscal 2016 results. The company’s fiscal year ended June 30, 2016.

In June 2017, the company filed its annual report after determining no restatement was necessary, but corrected immaterial errors to prior-period financial statements. The company also disclosed material weaknesses in its internal control over financial reporting.

The SEC said it “considered remedial acts promptly undertaken” by Hain and its cooperation with the SEC in settling charges. The company brought the matter to the attention of the SEC and assisted with the SEC investigation, regularly updating the SEC on its own internal investigation. “Hain’s actions in this regard were important in the determination not to impose a penalty,” the SEC said.

The company hired additional compliance staff, established an internal audit function and made changes to its revenue recognition practices, the SEC said. It standardized its contract documentation and revenue analyses; revised its review process and monitoring controls over contracts, payments, and incentives; and changed its communication function relating to contract modifications. It also developed a revenue recognition and contract review training program, the SEC said.

When deciding on enforcement actions, the SEC often considers four factors, said Nowak and Kang. Those include self-policing prior to discovery of misconduct, self-reporting of misconduct when discovered, remediation, and cooperation. “The level of cooperation credit given to companies may range from taking no enforcement action at all to reduced charges or sanctions,” they wrote.