Cayman-incorporated direct-selling company Herbalife Nutrition Ltd has agreed to pay $20 million to settle charges that it misled investors over its China operations in US regulatory filings over a six-year period.
To comply with Chinese law, which prohibits multi-level marketing, Herbalife said it paid distributors based on the number of hours they worked rather than the number of product purchases made. The SEC argues those claims were untrue and that Herbalife’s business model was similar to the one used in every country in which it operates.
“Herbalife deprived investors of valuable information necessary to evaluate risk and make informed investment decisions. When making disclosures to investors, issuers must ensure that those disclosures are accurate,” said SEC director Marc P. Berger in a statement.