Brocade received an unpleasant dispatch on Thursday, as the US SEC (Securities and Exchange Commission) revealed that it has started a formal inquiry into the company's past accounting policies.
Brocade has been pretty upfront about its accounting woes. In fact, the storage switch maker last month vowed to restate four years' worth - 2001 to 2004 - of financial results after an internal audit showed that Brocade did not properly account for some stock-based compensation given to employees on leaves of absences and others about to leave the firm.
These actions prompted the SEC to informally probe Brocade's situation. In a regulatory filing, Brocade said it received notice that the informal inquiry has now turned into a formal investigation and pledged to cooperate with the government.
Earlier this week, Brocade was forced to delay the filing of a second quarter regulatory form with the SEC in order to give the audit committee more time to complete its review of past financial data.
The entire accounting episode resulted in former CEO Greg Reyes stepping down in January and being replaced by Michael Klayko. Lucky guy. ®
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