Jim Cramer Explains What the Wells Notice Means for Under Armour

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Under Armour said that two of its top executives received 'Wells Notices' from the U.S. Securities and Exchange Commission.

The notices relate to the accounting treatment of sales booked between the third quarter of 2015 and the fourth quarter of 2016, Under Armour said, and were delivered to executive chairman Kevin Plan and chief financial officer David Bergman.

"Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law," Under Armour said in a filing with the SEC Monday. "The Wells Notices informed the Company and the Executives that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the Executives that would allege certain violations of the federal securities laws."

"The Company and the Executives maintain that their actions were appropriate and intend to pursue the Wells Notice process, which will include the opportunity to respond to the SEC Staff’s position, and also expect to engage in a dialogue with the SEC Staff to work toward a resolution of this matter," Under Armour added.

Plank, 47, stepped aside as CEO of Under Armour -- a business he founded in 1996--in October of last year, just weeks before the group revealed that it was co-operating with investigations from both the Securities and Exchange Commission and the U.S. Department of Justice.

In the video above, Jim Cramer breaks down what the Wells Notice means for the company and more importantly, what it doesn't mean. 

You can follow Jim Cramer and Katherine Ross on Twitter at @JimCramer and @byKatherineRoss. Read more from Katherine Ross here.

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Editor's Note: This article has been updated to reflect that Kevin Plank, former CEO and founder is 47 years old.