BNY Mellon to Pay Massachusetts $3M Over Computer Problem That Impacted Mutual Funds
Bank of New York Mellon (BK) will pay $3 million to the state of Massachusetts to resolve a probe that found that a computer glitch did not calculate net asset values for over 1,000 mutual funds. Although the bank hired SunGard InvestOne to calculate these values, there was one-weekend last year when a malfunction occurred.
The Massachusetts Securities Division conducted an investigation and discovered that BNY Mellon lacked a back-up plan to deal with such a malfunction. Because of this, non-uniform and untimely information was sent to clients and funds. As Secretary of the Commonwealth William F. Galvin noted, it is the job of financial institutions like BNY Mellon to oversee third-party vendors and put into place a back-up plan in the event a vendor’s system fails. The bank says that in the wake of the outage, it took action to protect client interests and ensure that the daily net asset values were issued.
BNY Mellon said that it has since made investors and the funds that sustained losses because of the computer error whole. The bank has made changes to supervisory procedures.
WedBush to Pay $675K Fine to Nasdaq and FINRA over Trading and Clearing Errors Involving Exchange-Traded Funds
Wedbush Securities Inc. will pay a $675K fine to the Nasdaq Stock Market and the Financial Industry Regulatory Authority Inc. over clearing and trading mistakes involving redemption and trading activities related to leveraged ETFs. Wedbush served as Scout Trading, LLC’s clearing firm.
According to FINRA, from 1/10 to 2/12, Scout Trading was not long enough in the shares that made up the redemption orders. Scott Trading turned in more than 250 naked redemption orders via Wedbush. These involved nearly a dozen ETFS that totalled over 295 million shares. This activity and ETF short-selling on the second market by Scout Trading led to Wedbush’s failure to deliver on a number of occasions. (This could have led to a naked short sale in which the seller does not arrange to borrow the securities in a manner timely enough for the buyer to receive the delivery within the standard three days.)
Scout Trading, which already consented to pay a $3M fine over the matter last year, then purportedly turned in creation orders to establish new ETF shares through Wedbush in order to close out the delivery failures. It then submitted more naked redemption orders and took part in more secondary market selling activity in the exchange-traded funds in transactions that caused the redevelopment of Wedbush’s failure to deliver. By settling Wedbush is not denying or admitting to the SEC’s findings.
Triad Advisers Resolve UIT Sales-Related Charges for over $200K
Brokerage-dealer Triad Advisers will pay $125K in fines and $102K in restitution to resolve FINRA charges accusing the Georgia firm of not giving certain customers discounts when selling them unit investment trusts. By settling, Triad Advisors is not denying or admitting to the findings.
The regulator said that the firm did not discount unit investment trusts from 5/09 to 4/14 and failed to have a proper supervisory system for these transactions. 2,088 UIT purchases were not reduced in price even though they should have been. This purportedly caused $102,631 in excessive sales.
The SSEK Partners Group is an institutional investor fraud law firm.
BNY Mellon to pay $3 million after Massachusetts probe of funds glitch, Reuters, March 21, 2016
Triad Advisors to pay more than $200,000 for failing to give sales charge discounts on unit investment trusts, Finra says, Investment News, March 17, 2016
FINRA and Nasdaq Fine Wedbush Securities Inc. $675,000 For Supervisory Violations Relating to Chronic Fails to Deliver by a Client in Multiple Exchange-Traded Funds, FINRA, March 21, 2016