Though routine, review of a public company's financials by the Securities and Exchange Commission's (SEC) Division of Corporate Finance (Corp Fin) can, in unique circumstances, lead to an enforcement action and should not be taken lightly. This is especially true given the backdrop of an announcement by the SEC's enforcement division regarding its creation of a new Financial Reporting and Audit Task Force and statements by the staff reflecting a refocus of efforts on accounting cases. The SEC's settlement with PACCAR, Inc. (PACCAR) for relatively minor issues that did not involve fraud allegations, or even a financial restatement, demonstrates how the staff is pursuing less significant violations and reinforces that disclosure revisions or accounting errors identified during a Corp Fin review could trigger such charges.

The PACCAR case

PACCAR, a Fortune 200 company based in Bellevue, Wash., is one of the world's largest manufacturers of commercial trucks and related aftermarket parts under the Kenworth, Peterbilt and DAF nameplates. Its wholly-owned subsidiary, PACCAR Financial Corporation (PFC), provides financing and leasing of PACCAR-manufactured equipment to U.S.-based customers. On April 24, 2012, PACCAR received notice that the SEC had initiated a formal investigation relating to the company's financial reporting from 2008 to 2011. More specifically, the SEC requested information about the company's loan loss reserves, troubled debt restructuring and segment reporting, all of which had been addressed by Corp Fin comment letters in 2010. After a relatively short inquiry, the SEC convinced PACCAR to settle to a complaint, without admitting or denying any wrongdoing, that contained allegations involving relatively minor books and records issues (i.e., non-scienter based charges for the mere failure to have perfect accounting records). The complaint contained no allegations of fraud, PACCAR did not restate its prior financials and no individuals were charged by the SEC.