Additionally, the SEC alleged that AmTrust did not disclose the specific factors or assumptions supporting Pipoly’s decision to make accounting adjustments. The insurance company also failed to maintain a sufficient system of internal accounting controls and documentation supporting management’s best estimate.
Furthermore, the Commission accused AmTrust and Pipoly of failing to disclose the loss contingencies created by its former CFO’s judgmental adjustments to the insurance company’s historical experience.
Pipoly’s total adjustments were more than $300 million by the end of 2015. It affected all of AmTrust’s reporting segments, noted the SEC in the complaint.
According to the SEC, “AmTrust and Pipoly were negligent in their conduct…” and they violated certain antifraud Sections 17(a)(2) and (3) of the Securities Act of 1933 and Sections 21(d), 21(e) and 27 of the Securities Exchange Act of 1934.
The SEC also alleged violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-13, and 13a-15(a), which pertain to reporting, record-keeping, and internal controls.
