KB Home (NYSE:KBH), Los Angeles, on Oct. 9 disclosed in a 10-Q quarterly report filed with the Securities and Exchange Commission that the SEC has issued a formal order of investigation regarding possible accounting and disclosure issues.
In the report, KB said that SEC "has stated that its investigation should not be construed as an indication...that there has been any violation of the federal securities laws." KB said it was cooperating with the SEC but did not specify what the SEC was investigating.
A spokesperson for KB Home responded to a call seeking comment with an email, stating, "KB Home strives to operate its business with the utmost transparency and integrity, and in accordance with generally accepted accounting principles.While the SEC order does not specify the subject matter and we cannot speculate on it at this time, we understand that part of the SEC's mandate is to conduct these sorts of investigations, which it has done with hundreds of public companies over the past few years."
"We have no indication from discussions with the company as to what the focus is," wrote Stephen East, home building analyst at Pali Capital, in an Oct. 12 investor alert. "Given its history of options backdating with its former CEO Bruce Karatz, one's first assumption is that this issue is still lingering. However, we have nothing to confirm that thought process."
Former KB CEO Bruce Karatz was indicted earlier this year on charges related to the backdating of stock options awarded to KB executives.
Shares of KB were trading up 3.5% in late trading Tuesday after falling nearly 8% on heavy volume Monday.