The Cheesecake Factory settled with the Securities and Exchange Commission over allegedly misleading disclosures that the restaurant company made about the coronavirus pandemic’s effect on its business and financial well-being.
The SEC said Friday that the Cheesecake Factory case was the first time the SEC has charged a public company about misleading its investors regarding the financial impact of the coronavirus pandemic.
The Cheesecake Factory’s filings in March and April that said its restaurants were “operating sustainably” were deemed “materially false and misleading” by the SEC because the SEC said it determined that the restaurant business was losing $6 million each week and had 16 weeks of cash remaining.
While the Cheesecake Factory did not disclose its full financial troubles, it did share bad news with potential private equity investors or lenders and informed landlords that it would not pay rent in April, according to the SEC.
“When public companies describe for investors the impact of COVID-19 on their business, they must speak accurately,” said Stephanie Avakian, SEC division of enforcement director, in a statement. “The Enforcement Division, including the Coronavirus Steering Committee, will continue to scrutinize COVID-related disclosures to ensure that investors receive accurate, timely information, while also giving appropriate credit for prompt and substantial cooperation in investigations.”
The Cheesecake Factory confirmed its settlement in a Form 8-K filing with the SEC that the restaurant business published on its website on Friday.
“The Company fully cooperated with the SEC in connection with the settlement,” the company said in the Form 8-K filing. “Without admitting or denying the SEC’s allegations (other than with respect to the SEC’s jurisdiction), the Company agreed to the entry of the order pursuant to which the Company agreed to pay a penalty of $125,000 to the SEC and cease and desist from committing or causing any violations and any future violations of the reporting standards of Section 13(a) of the Securities Exchange Act of 1934 and Rules 12b-20 and 13a-11 thereunder.”
In an updated statement on COVID-19 published on the company’s website earlier this week, Cheesecake Factory president David M. Gordon said his company will continue to prioritize the health of its workers and diners.
