The Securities and Exchange Commission announced Friday it has settled charges against Cheesecake Factory Inc. for misreporting the impact of the coronavirus on its business operations and finances.The SEC’s settlement reveals the Calabasas restaurant operator submitted filings to the agency on March 23 and April 3 in which it claimed its restaurants were “operating sustainably” amid pandemic-time business restrictions. But after reviewing Cheesecake Factory’s finances, the SEC found the company was losing $6 million every week – a rate that would have depleted its cash reserves in just 16 weeks.What’s more, Cheesecake didn’t disclose this information in public filings, but did share it with existing and potential investors in efforts to obtain fresh capital.
Additionally, the SEC found Cheesecake Factory didn’t publicly disclose its decision to stop paying rent in April despite having already informed its landlords privately.The misrepresentations and withholding of certain information, the SEC said, were violations of reporting provisions in federal securities laws. Cheesecake Factory agreed to pay a $125,000 fine to settle the charges. It did not admit wrongdoing for any of the SEC’s findings.According to Seeking Alpha, the Cheesecake charges are the SEC’s first against a public company for misleading investors about financial damages caused by the pandemic.“When public companies describe for investors the impact of COVID-19 on their business, they must speak accurately,” Stephanie Avakian, director of the SEC’s Enforcement Division, said in a statement. "The Enforcement Division, including the Coronavirus Steering Committee, will continue to scrutinize COVID-related disclosures to ensure that investors receive accurate, timely information, while also giving appropriate credit for prompt and substantial cooperation in investigations.”Shares of Cheesecake Factory closed Friday down 81 cents, or 2 percent, to $38.62 on the Nasdaq, on a day when the overall Nasdaq gained 0.7 percent.