Shares of Rio Tinto (RIO) dropped in morning trading after the mining and metals company and two former executives were charged with fraud by the U.S. Securities and Exchange Commission for inflating the value of coal assets.

SEC CHARGES: The SEC charged Rio Tinto, its former Chief Executive Officer Thomas Albanese and former Chief Financial Officer Guy Elliott with failing to follow accounting standards and company policies to accurately value and record coal assets in Mozambique acquired for $3.7B in 2011 from Riversdale Mining and sold a few years later for $50M. The complaint, which was filed in federal court in Manhattan, alleges that after the deal was completed, the project faced the rapid decline of the value of the assets and the miner sought to hide or delay disclosure of the extent and nature of the developments from its board, audit committee and investors. "Rio Tinto and its top executives allegedly failed to come clean about an unsuccessful deal that was made under their watch. They tried to save their own careers at the expense of investors by hiding the truth," Steven Peikin, co-Director of the SEC's Enforcement Division, said in a statement. By making misleading public statements, Rio Tinto and the executives were able to raise $5.5B from U.S. investors, the SEC said, adding that they continued to solicit the investments even after executives of the Mozambique subsidiary told Albanese and Elliott that the unit was likely worth negative $680M.

FCA SETTLEMENT: Separately, the U.K.'s Financial Conduct Authority announced a settlement on Tuesday with Rio Tinto under which the miner will pay GBP27M for failing to carry out an impairment test and to recognize an impairment loss on the value of the Mozambique mining assets.

RIO SPEAKS OUT: In a statement, Rio Tinto said it would defend itself vigorously against the SEC's "unwarranted" allegations and that it believes the SEC's claims will be rejected. The company said the FCA had "made no findings of fraud, or of any systemic or widespread failure by Rio Tinto."

PRICE ACTION: Rio Tinto shares trading in New York dropped almost 3% in morning trading to $48.33.