Business Objects Faces SEC SuitBusiness Objects Faces SEC Suit

Business Objects SA on Wednesday said it has been notified that it may be sued by the Securities Exchange Commission for the practice of not disclosing the company's backlog of unshipped orders.

The San Jose, Calif., company said it received a “Wells notice” from the SEC, alleging that the business intelligence software maker has violated the Securities and Exchange Act of 1934 relating to periodic reporting requirements.

The SEC notification is related only to the company's practice of not disclosing its backlog of unshipped orders in its financial earnings reports or its balance sheet, and does not involve revenue recognition issues, the company said.

“The company believes its disclosures are compliant with the security laws and are consistent with industry and general practice with respect to disclosing backlog,” Business Objects said in a statement, adding that it intends to “vigorously defend” the practice.

The suit would not assert fraud on the part of Business Objects, and none of its officers or directors would be named as defendants, the company said.

News of the SEC action sent Business Objects' stock down Wednesday, opening at $19.25 from the previous day's close of $20.70.