Boston, MA 09/22/2014 (wallstreetpr) – ITT Educational Services, Inc. (NYSE:ESI) reported that it had received a notice from the SEC that it can take enforcement action pertaining to its loans to students. Following the news, ITT Educational dropped more than 35% on Friday’s trading session. The shares have declined more than 85% in this year.
SEC review
All the issues related to accounting and disclosure started popping up when SEC started its review on ITT Educational’s loan programs last year. ITT Educational Services, Inc. (NYSE:ESI) is in talks with the SEC so that it can prevent the enforcement decision by the agency. The spokeswoman for ITT said that ITT has worked with several independent experts. The company has acted in good faith in taking all the decisions on complicated issues. The problem even extends as the Education Department has placed ITT Educational on heightened cash monitoring. ITT has to disburse funds before drawing federal Title IV money.
Non-submission of financial statements
ITT Educational Services, Inc. (NYSE:ESI) has not submitted financial statements for year 2013 and compliance audits of company’s utilization of federal funds. It is the prime reason ITT is placed on heightened cash monitoring. The step will delay the receipt of student aid for one business day. Title IV student aid contributed more than 80% of its revenue in 2012. Due to the non-submission of statements on time, ITT Educational is also imposed with the standard penalties.
The existing problems
The federal governments, as well as state attorneys general, are stringent on for-profit colleges lending, recruiting and marketing practices. Corinthian Colleges Inc (NASDAQ:COCO) was imposed with a 21-days delay on using the student loan funds which forced the institute to decide that it will sell or close its 107 campuses. The market and ITT Educational Services, Inc. (NYSE:ESI) was prepared for a SEC action. The news doesn’t come as a total surprise. However, it remains to be seen how ITT Educational will deal with the existing problem.
