Shares of ITT Educational Services Inc. tumbled on Monday after the for-profit education provider said it was being investigated by federal securities regulators who subpoenaed documents related to private loans to students.
THE SPARK: The Securities and Exchange Commission investigation was disclosed through an SEC filing that the company made after markets closed on Friday. ITT said it received a subpoena from the SEC on Feb. 8, along with a letter informing the company of the investigation.
The subpoena requested that ITT turn over information about agreements the company had with third parties to create programs making private education loans available to its students. Private loans help students meet costs not covered through government financial aid.
ITT said it entered into one of the private loan agreements in February 2009 and into other agreements in January 2010. The regulatory filing did not identify the third parties that were involved in the loan programs.
THE BIG PICTURE: ITT offers degrees in subjects such as computer programing and Web development through its ITT Technical Institutes and Daniel Webster Colleges.
Enrollments in the for-profit education industry have declined in recent years as the schools came under increasing scrutiny. Some lawmakers have criticized the schools' practices, saying that they leave students saddled with huge loans and slim job prospects, and the government has stiffened regulation.
"There can be no assurance that the ultimate outcome of the SEC investigation will not have a material adverse effect on our financial condition or results of operations," the company said.
SHARE ACTION: Shares of Carmel, Ind.-based ITT fell $2.57, or nearly 14 percent, to $16.06 in afternoon trading. The stock has tumbled from a 52-week high of $74.55 reached last February to as low as $11.69 on Jan. 24.