Take-Two Interactive, the creator of the Grand Theft Auto video game franchise, will not suffer financial penalties for including hidden sex scenes in one of its most popular titles following a settlement announced yesterday with US regulators.

Shares in the company plunged more than 14 per cent in after-hours trading, however, after it reported a widened quarterly loss.

The hidden scenes in Take-Two’s Grand Theft Auto: San Andreas, which featured the game’s main character engaging in sex with in-game girlfriends, sparked outrage among parents’ groups when they were discovered last year.

They prompted an investigation by the US Federal Trade Commission, which alleged that the company had inappropriately marketed the game as suitable for minors.

Under the settlement announced yesterday, Take-Two said it had agreed not to misrepresent a video game’s age rating or content in the future. It agreed to submit future games to review by rating authorities but said it would not pay any fine.

Paul Eibeler, chief executive, said Take-Two was pleased the matter had been resolved. “We look forward to putting this behind us and concentrating on what we do best, creating interactive entertainment,” he said.

The settlement came as Take-Two reported a net loss of $50.4m for the second quarter compared with a loss of $8.2m a year ago. The company said weak sales and low retail prices ahead of the release of a new generation of gaming consoles had contributed to a “difficult business environment”.