Under Armour executives were warned they could be charged over accounting disclosures that may have violated securities laws

• Under Armour received a "Wells notice" last week, warning executives that they could face a suit over allegations they violated securities laws.
• The SEC is scrutinizing Under Armour over claims its disclosures of "pull forward" accounting practices throughout 2015 and 2016 may have violated securities laws.
• About 80% of companies served with a Wells notice face charges, according to a WSJ analysis of government data.

SEC investigators intend to recommend that the SEC move forward with allegations that Under Armour executives violated securities laws, according to documents released July 22.

The SEC sent Under Armour a Wells Notice warning Kevin A. Plank, Under Armour founder, and David E. Bergman, Under Armour CFO, that they could face SEC enforcement for allegedly manipulating company sales in a way that violates securities laws.

The SEC is scrutinizing Under Armour over disclosure-related allegations around its use of "pull forward" sales tactics throughout 2015 and 2016.

Though a Wells Notice does not formally charge the company of breaking laws, it does indicate that SEC staff has recommended pursuing enforcement action. About 80% of companies served with a Wells Notice face charges, according to a WSJ analysis of government data.

'The Wells Notices informed the Company and the Executives that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the Executives that would allege certain violations of the federal securities laws," the company wrote in the July 22 SEC filing.

Shares of Under Armour were down nearly 4% in pre-market trading on Monday morning, but the stock rebounded by noon.

Federal investigators have been looking into Under Armour's accounting practices since 2017. Last November, the Wall Street Journal reported that Under Armour was the subject of a federal accounting probe. The athletic-wear company addressed the investigation in November, stating that it had been cooperating with the SEC since 2017 while denying wrongdoing.

In the coming days, Under Armour has the opportunity to file a formal response to the Wells Notice and talk with SEC staff in an attempt to resolve the issue.

"The Company and the Executives maintain that their actions were appropriate and intend to pursue the Wells Notice process," the company wrote in the filing.