Risk & Compliance

SEC Opens Probe of Quality Systems

Company also discloses that the commission is seeking documents and records concerning its chief financial officer.
Stephen TaubFebruary 6, 2007

Quality Systems, which makes software for medical records, disclosed that the Securities and Exchange Commission has launched an investigation of trading activity in the its securities.

The company added that the SEC is also seeking documents and records concerning Paul Holt, chief financial officer since November 2000. Holt, who also has served as controller since January of that year, previously was controller for metal manufacturing company Sierra Alloys and for manufacturer and distributor Refrigeration Supplies Distributor.

Quality Systems stressed that the SEC has made it clear that the investigation does not mean there has been a violation of law. The company provided no further details, however, other than to add that it intends to cooperate fully.

The probe obviously took investors by surprise, as they sent the company’s shares spinning downward by about 9 percent in early trading on Tuesday.

“They’re being fairly poker-faced about it, but I don’t think it’s going to amount to much,” Caris & Co. analyst Gene Mannheimer at told the Los Angeles Times.

Despite a 230 percent climb in the company’s share price over the past 30 months, dissident shareholders complained of executive pay levels and insular management practices, according to the Times. In 2005, two members of the dissident group reportedly landed seats on the Quality Systems board.