## Facts

- Grupo Simec S.A.B. de C.V. is a Mexican steel manufacturer with operations in Mexico and the United States whose securities traded on the New York Stock Exchange.
- As a foreign private issuer, Grupo Simec filed periodic reports with the SEC under Exchange Act § 13(a), including annual reports covering fiscal years 2008 through 2017.
- For ten consecutive annual reporting periods (fiscal years ended 2008–2017), Grupo Simec reported material weaknesses in internal control over financial reporting (ICFR) that it did not remediate.
- In two annual reporting periods (2015 and 2016), management disclosed it failed to complete the required management evaluation of ICFR.
- The SEC found the persistence and breadth of the disclosed ICFR weaknesses indicated that management did not appropriately address, and in some periods did not adequately assess, the identified weaknesses and related risks.
- The SEC instituted a cease-and-desist proceeding under Exchange Act § 21C, which was resolved on consent; Grupo Simec neither admitted nor denied the findings (except jurisdiction).

## Issues

1. Whether an issuer violates the Exchange Act’s internal-controls requirements by failing to remediate admitted material weaknesses in ICFR over an extended, multi-year period.
2. Whether an issuer violates Exchange Act reporting and internal-controls requirements by failing to complete required annual management evaluations of ICFR.
3. Whether repeated public disclosure of material ICFR weaknesses negates or reduces liability for failing to maintain effective ICFR.

## Decision

- The SEC found that Grupo Simec violated the federal securities laws in connection with ICFR.
- The SEC ordered Grupo Simec to cease and desist from committing or causing violations and any future violations of applicable Exchange Act reporting and internal-controls provisions.
- The SEC imposed additional relief, including a civil penalty and undertakings designed to improve ICFR, pursuant to the settlement.

## Legal Principles

- Exchange Act § 13(b)(2)(B) requires issuers to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances about the reliability of financial reporting.
- Management is responsible for conducting required evaluations of ICFR and reporting the results in annual filings when those requirements apply.
- Persistent, unremediated material weaknesses in ICFR can support findings that an issuer has failed to maintain adequate internal controls, even when the weaknesses are disclosed in periodic reports.
- Consent orders under Exchange Act § 21C may impose cease-and-desist relief, monetary penalties, and compliance undertakings without an admission of the SEC’s factual findings.

## Conclusion

The SEC concluded that a decade of unremediated, repeatedly reported ICFR material weaknesses—along with failures in certain years to complete required ICFR evaluations—constituted Exchange Act violations warranting cease-and-desist relief, penalties, and remedial undertakings.


In re Grupo Simec S.A.B. de C.V., Exchange Act Release No. 84996 (SEC Jan. 29, 2019)