SEC Institutes Settled Order as to Key Tronic Corporation, Former CFO (Now CEO), and Senior Vice President for Books and Records and Internal Controls Violations

ADMINISTRATIVE PROCEEDING
File No. 3-22630

April 20, 2026 – The Securities and Exchange Commission today announced settled charges against contract manufacturer Key Tronic Corporation, headquartered in Washington, for books and records and internal controls violations concerning improper expense management at a Key Tronic facility in Oakdale, Minnesota, and its response to allegations from a complaint related to that facility. The SEC also settled charges against Key Tronic’s then-CFO, now CEO, Brett Larsen, and Nicholas Fasciana, Key Tronic’s Senior Vice President of U.S. Operations, for causing Key Tronic’s books and records and internal controls violations. The SEC also settled charges against Fasciana for additional books and records and internal controls-related violations.

The SEC’s order finds that in the first half of fiscal year 2021, Key Tronic employees at Oakdale generated false entries in the facility’s inventory system that indicated the inventory was undergoing manufacturing during a monthly period even though the facility did not work on the inventory in that period, which improperly increased income. According to the order, the Oakdale employees reversed the entries after the end of the period, and Fasciana was aware of and directed some of this misconduct.

As set forth in the order, on the morning of its quarterly earnings release in January 2021, Key Tronic received an internal complaint about the Oakdale misconduct. The order finds that within hours, Key Tronic, including Larsen and others in senior management, confirmed the complaint’s core allegations, and Key Tronic reopened its books and recorded the misconduct’s quarterly financial impact of nearly $1 million by reversing the improper income and also recorded about $764,000 in pre-tax adjustments to correct other recently identified accounting errors, which had the effect of offsetting most of the reversal of the improper income. According to the order, a portion of these adjustments were booked out-of-period, and, had Key Tronic recorded the out-of-period adjustments in the periods in which the errors occurred, its reported quarterly net income of $1.58 million would have been reduced by 44%. The order finds that while Key Tronic concluded that the adjustments fell below its materiality threshold, Key Tronic did not conduct a sufficient materiality analysis in light of the surrounding circumstances. The order further finds that although Key Tronic’s auditor advised it to consider delaying releasing earnings, Key Tronic released earnings as scheduled. The order also finds that on the earnings call later that day, Key Tronic reported year-over-year increases in net income and EPS but still fell short of its guidance.

The SEC’s order finds that Key Tronic violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. Without admitting or denying the allegations, Key Tronic agreed to cease and desist from violating these provisions. In determining to accept Key Tronic’s offer of settlement, the Commission considered its cooperation and remedial efforts. The SEC’s order finds that Larsen caused Key Tronic’s violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. Without admitting or denying the allegations, Larsen agreed to cease and desist from causing any violations of these provisions and to pay a civil penalty of $20,000. The SEC’s order also finds that Fasciana violated Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder and caused Key Tronic’s violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. Without admitting or denying the allegations, Fasciana agreed to cease and desist from committing or causing any violations of these provisions and to pay a civil penalty of $15,000.

The investigation was conducted by John Archfield, Kristen Eddy, and Samantha Williams, and supervised by Melissa Armstrong, Kristen Dieter, Jeffrey Weiss, and Stacy Bogert.