SEC Fines GTT Communications for Lack of Disclosure of Material Information

The Securities and Exchange Commission (SEC) has charged GTT Communications, Inc with failing to disclose material information in several Commission filings. These filings increased the company's reported operating income by over 15% in three quarters from 2019-2020. GTT self reported, undertook affirmative remedial measures, and provided substantial cooperation to the SEC; thus, a civil penalty was not imposed. The discrepancies began when GTT experienced rapid growth through acquisitions between 2017-2020, yet had difficulty reconciling data generated from two key operational systems. Over time, these systems showed a persistent discrepancy between the company's expected expenses and those reflected in invoices received from vendors. GTT still made unsupported adjustments of more than $35 million which increased its reported operating income despite lacking sufficient information for accurate reporting or record-keeping. In December 2020, GTT disclosed the financial statements should no longer be relied upon and they initiated an internal investigation. After discovering the issues concerning costs, GTT attempted to remediate its accounting and financial reporting issues while also providing substantial cooperation throughout the SEC's investigation. The SEC found that GTT violated antifraud provisions of the Securities Act of 1933 as well as certain reporting, record-keeping and internal control provisions of the federal securities laws. They agreed to cease and desist from further violations of the securities laws without admitting or denying the SEC’s findings. The SEC acknowledged GTT's timely self-reporting, cooperation and remediation in their decision not to impose a monetary penalty.