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NEW YORK (AP) — Shares of ITT Educational Services Inc. shed a third of their value after it said the Securities and Exchange Commission may take enforcement action against for-profit education company over its student loans.
ITT said in a regulatory filing on Friday that in August it received notice from the SEC's Division of Enforcement that they made a preliminary determination to recommend an enforcement action against the Carmel, Indiana, company. The notice said the recommendation may seek remedies such as an injunction, a cease-and-desist order and financial relief like civil monetary penalties.
Shares of ITT Educational Services dropped $2.70, or 35 percent, to $4.95.
The notification — called a Wells Notice — is not a formal allegation or finding of wrongdoing. ITT said it made a submission to the Division of Enforcement explaining why it doesn't think any action should be started against the company. ITT said it also plans to continue to talk about the issues with the SEC.
ITT said it plans to defend itself vigorously against any legal action taken against it by the SEC, but can't predict the outcome of any legal action or if a settlement will come about.
For-profit education companies have come under scrutiny from the federal government and state attorneys general partly because of their practices surrounding student loans. In February the Consumer Financial Protection Bureau filed suit against ITT, alleging that it pushed students into high-cost private loans knowing they would likely default. The company denied the charges.
ITT also disclosed on Friday that it has been put on heightened cash monitoring by the U.S. Department of Education and must disburse funds to eligible students and parents before it can request or draw down Title IV funds from the Education Department. ITT said that the Education Department's actions were because it missed a deadline to submit 2013 financial statements and compliance audits of its administration of federal student financial aid programs under Title IV.
In addition, ITT said the New York Stock Exchange has granted its request for a listing extension through Nov. 15. It previously received notice that it faced potential delisting for failing to file its annual report for last year on time. ITT said it is working to complete the necessary reviews and analyses so it can make the filing as soon as possible, but that there's no guarantee it will be able to make the filing by Nov. 15.
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