Merrill Lynch downgraded Career Education (CECO) to neutral from buy.
Analyst Lauren Rich Fine says with an investigation now formal, the SEC has access to current and former employees and can fine the company if wrongdoing is found. She notes the company's 10-K indicated that on Jan. 7, 2004, it was notified of an informal SEC inquiry that was prompted, in Career Ed's opinion, by news reports related to Gibbs College, Brooks Institute of Photography. The investigation is now formal.
Also, an amended class-action shareholder lawsuit was filed June 17, indicating the company engaged in record falsification. Rich Fine says today's news, and the amended lawsuit, could hang over the shares for some time.