Could ITT Educational Services be the next large for-profit company facing collapse? Things might not be that dire for the parent company of ITT Technical Institute, but the institution recently revealed it’s under increased government examination that could result in the loss of federal funds.

According to the Wall Street Journal, ITT received a notice from the Securities and Exchange Commission indicating that the regulator may pursue a cease-and-desist order and fines against the education company.

ITT’s latest regulatory filing [PDF] sheds more like on just what’s brewing between the regulator and the company.

The company admits it has been under investigation by the SEC concerning two private education loan programs for students. In early August the company received a Wells Notice from the SEC telling ITT that regulators had made preliminary determinations to recommend that regulators file an enforcement action against the company.

According to the ITT filing, the recommended enforcement action could include a civil injunctive action, public administrative proceedings or civil monetary penalties.

A Wells Notice isn’t a formal allegation or a finding of wrongdoing, instead it indicates that the SEC staff has determined it may bring a civil action against a person or firm, and provides the person or firm with the opportunity to provide information as to why the enforcement action should not be brought.

Officials with ITT say they intend to “defend itself vigorously against any legal action taken by the SEC.”

The company also revealed in its filing that the Department of Education placed ITT under heightened cash monitoring earlier this summer. The action means that before ITT can request or draw federal funds it must make disbursements to students and parents for the amount of Title IV funds that those students and parents are eligible for and must compile borrower-level records with respect to the funds disbursed to each student or parent.

The latest move by the Dept. of Education came after ITT failed to submit financial statements for 2013 and compliance audits of its administration of federal financial aid.

The Dept. of Education has given the company until November 4 to submit a letter of credit for a term of five years. If the company fails to do so it could lose eligibility to participate in Title IV programs, which the company says would “have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.”

While these actions don’t spell the end for ITT-operated schools, they do mark another issue for the for-profit company that is already under government scrutiny.

Back in February, the Consumer Financial Protection Bureau sued ITT for allegedly pressuring students into predatory loans and mislead students on future job prospects and salaries.

Struggling ITT Educational Faces Scrutiny on Multiple Fronts [The Wall Street Journal]

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