American Electric Power Company, Inc. (AEP) has recently settled with the Securities and Exchange Commission (SEC) over violations of federal securities laws related to its relationship with Empowering Ohio's Economy, Inc. and its misleading statements. The company reported revenues of $19.0 billion, operating income of $3.6 billion, and net income of $2.2 billion for the year ended December 31, 2023.
AEP fully funded and controlled Empowering Ohio, a 501(c)(4) organization, and directed its contributions to 501(c)(4) organizations associated with politicians. AEP contributed a total of $700,000 to Empowering Ohio in 2019, which it failed to disclose as related party transactions in its 2019 Form 10-K, as required by accounting standards.
The company's stock price dropped by 10% following the publication of a news article linking AEP to contributions made by Empowering Ohio. In response, AEP's then-CEO issued a press release stating that AEP did not make any contributions to Generation Now, which was misleading as AEP had fully funded Empowering Ohio and directed its contributions to Generation Now. This led to a material misstatement and omission of material facts necessary for investors to make informed decisions, resulting in a violation of federal securities laws.
As part of the settlement, AEP has consented to the entry of a cease-and-desist order and has been found to have violated Section 17(a)(2) of the Securities Act, Section 13(a) of the Exchange Act, and Rule 12b-20 and 13a-1 thereunder. The violations stem from the company's failure to disclose material related party transactions and its misleading statements, which have resulted in a settlement with the SEC. As a result of these announcements, the company's shares have moved 1.1% on the market, and are now trading at a price of $97.84. For more information, read the company's full 8-K submission here.
