Firm’s Willful Lack of Disclosure to Investors Results in $5.5M Fine

On Monday, September 16, 2019, the Securities and Exchange Commission settled charges against Marvell Technology Group for misleading investors when it engaged in an undisclosed revenue management scheme in order to meet publicly issued revenue guidance.


The SEC complaint said Marvell had “orchestrated a scheme” to accelerate, or ‘pull in’ sales to the current quarter that had been scheduled for future quarters. The SEC indicated the purpose of pulling in revenue was to “close the gap” between the chip-maker’s actual results and analyst expectations. According to the SEC’s order, Marvell’s use of pull-ins masked a substantial decline in customer demand, a loss of market share, and reduced future sales.

Troublesome Findings

Marvell consented to the SEC order that found the company violated the antifraud and reporting provisions of federal securities laws. The alleged scheme began after Marvell faced a substantial decline in customer demand in its core product markets, and became concerned about the adverse consequences that would result from missing its public guidance.

Marvell orchestrated a plan to accelerate, or pull-in, sales that had originally been scheduled for future quarters to the current quarter in order to close the gap between actual and forecasted revenue, meet publicly issued guidance, and mask declining sales.

The company’s failure to disclose to investors its use of sales pull-ins created a misleading and incomplete picture of about the its financial results and its positioning to meet future revenue targets.

Ripple Effect

Marvell’s senior management directed the pull-in effort and placed significant pressure on its sales employees to push customers to agree to accept products earlier than scheduled. The company then closely tracked the gap between actual and forecasted revenue, and the use of pull-ins to bridge that gap. Internal concerns were raised that the pull-ins were masking declining market conditions and also obfuscating the company’s deteriorating financial results, thereby misleading investors. Senior management, however, refused to abandon its use of pull-ins, and those who raised concerns were ignored. Marvell’s senior management also failed to inform the company’s Board of Directors or its independent auditor of its pull-in scheme.

Shortly after Marvell’s Board of Directors first became aware in August 2015 of senior management’s use of pull-ins to meet public revenue guidance, Marvell announced a delay in filing its Form 10-Q for Q2 FY2016 and the commencement of an internal investigation to examine, among other things, the company’s use of pull-ins. Shortly thereafter, Marvell’s independent auditor resigned.

From the outset of the pull-in effort, Marvell’s senior management was warned of the consequences of pull-ins on future revenue. Sales teams pushed back, warning that the effects of the pull-ins plus the declining market demand made it all but impossible for the company to meet its revenue targets.

Members of Marvell’s Financial Planning and Analysis Department, which performed a critical role in assisting senior management in implementing the pull-in plan, came to the realization that the pull-ins were having adverse impacts on future quarter revenue and also warned senior management. But Marvell’s senior management ignored the warnings and pressed ahead with the pull-in effort.

Failure to Disclose

Marvell reported its financial results for Q4 FY2015 and Q1 FY2016 in earnings calls and in reports filed with the Commission, without disclosing that a significant portion of its revenue had resulted from the use of pull-ins intended to meet the company’s public revenue guidance.

By failing to disclose this information, Marvell misled investors in several ways. First, investors were left with the misleading impression that Marvell was able to meet its public guidance organically, through normal customer demand for its products. Senior management, however, was aware that its natural revenue was far below the company’s public guidance primarily because of a significant decline in customer demand caused by changing market conditions.

The SEC determined that without the same information, investors lacked an ability to evaluate Marvell’s financial results in context and compare results across periods.


To avoid the many intentional and avoidable missteps Marvell made over a period of several months, a firm must have a clear set of policies and procedures in place, as well as a strong culture of compliance. In addition, employees should be required to undergo adequate training to recognize similar situations and understand the risks involved. We’re experts in this area and would welcome the opportunity to evaluate your firm’s ongoing needs. Contact us here or at (619) 278-0020.

Leave a Reply

Your email address will not be published. Required fields are marked *