BNY Mellon Settles Charges Stemming From Miscalculations of Regulatory Capital Figures
BNY Mellon agreed to pay a $6.6 million penalty to settle SEC charges for falsely reporting risk-based capital ratios by improperly excluding $14 billion in collateralized loan obligation assets from its calculations between Q3 2010 and Q1 2014, without Federal Reserve approval or adequate internal controls.
BNY Mellon violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 by failing to properly account for $14 billion in collateralized loan obligation assets consolidated onto its balance sheet in 2010. The firm excluded these assets from its risk-weighted asset calculations without obtaining required Federal Reserve approval, leading to understated risk-weighted assets and overstated capital ratios in quarterly and annual reports from Q3 2010 to Q1 2014. The SEC imposed a $6.6 million penalty, and BNY Mellon consented to the order without admitting or denying the allegations, while the Federal Reserve System provided investigative assistance.
BNY Mellon agreed to pay a $6.6 million penalty to settle SEC charges related to material misstatements in its regulatory capital disclosures between the third quarter of 2010 and the first quarter of 2014. The firm improperly excluded approximately $14 billion in collateralized loan obligation assets from its risk-weighted asset calculations, despite having consolidated those assets onto its balance sheet in 2010. BNY Mellon failed to obtain the required approval from the Federal Reserve Board to make this exclusion and lacked adequate internal accounting controls to ensure accurate financial reporting. As a result, its reported risk-based capital ratios were inflated, misleading investors and regulators about the firm’s true financial risk profile. The SEC found that these actions violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, which govern internal controls and recordkeeping. BNY Mellon consented to the SEC’s order without admitting or denying the allegations. The investigation was conducted by SEC Enforcement staff Armita Cohen and Amy Flaherty Hartman, supervised by Michael Osnato, Reid Muoio, and Jeffrey Shank, with critical assistance from the Federal Reserve Board and the Federal Reserve Bank of New York.
Exhibits & Attached Documents (1)
Extracted insights
- $14.00B $14 billion ≥$1B
- $6.60M $6.6 million $1M–$10M
- person bny mellon
- person bny mellon settlement
- person federal reserve board approval
- agency sec case
- agency sec investigation
- agency Securities and Exchange Commission
- BNY Mellon agreed to pay $6.6 Million Penalty
- SEC announced BNY Mellon Settlement
- BNY Mellon excluded from calculations Approximately $14 Billion in Collateralized Loan Obligation Assets
- BNY Mellon failed to obtain Federal Reserve Board Approval
- BNY Mellon understated Risk-Weighted Assets in Quarterly and Annual Reports (Q3 2010 to Q1 2014)
- BNY Mellon overstated Risk-Based Capital Ratios in Quarterly and Annual Reports (Q3 2010 to Q1 2014)
- BNY Mellon violated Internal Controls and Recordkeeping Provisions of Securities Exchange Act of 1934
- SEC Investigation conducted by Armita Cohen and Amy Flaherty Hartman
- SEC Case supervised by Michael Osnato, Reid Muoio, and Jeffrey Shank
The Securities and Exchange Commission today announced that BNY Mellon has agreed to pay a $6.6 million penalty to settle charges stemming from miscalculations of its risk-based capital ratios and risk-weighted assets reported to investors. An SEC investigation found that BNY Mellon deviated from regulatory capital rules by excluding from its calculations approximately $14 billion in collateralized loan obligation assets that the firm consolidated onto its balance sheet in 2010. BNY Mellon never obtained Federal Reserve Board approval as required under regulatory capital rules to exclude the assets from its calculations. Due to the miscalculations and the firm’s lack of internal accounting controls to ensure its financial statements were being prepared properly, BNY Mellon understated its risk-weighted assets and overstated certain risk-based capital ratios in quarterly and annual reports from the third quarter of 2010 to the first quarter of 2014. “Regulatory capital ratios and risk-weighted assets are critical data points for investors in large banking institutions like BNY Mellon,” said Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “We will continue to aggressively focus on these kinds of disclosures to ensure that control failures do not prevent investors from receiving accurate and timely information.” Without admitting or denying the charges, BNY Mellon consented to an SEC order finding that it violated internal controls and recordkeeping provisions of the federal securities laws, specifically Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. The SEC’s investigation was conducted by Armita Cohen and Amy Flaherty Hartman and the case was supervised by Michael Osnato, Reid Muoio, and Jeffrey Shank. The SEC appreciates the assistance of the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York.
The Securities and Exchange Commission today announced that BNY Mellon has agreed to pay a $6.6 million penalty to settle charges stemming from miscalculations of its risk-based capital ratios and risk-weighted assets reported to investors. An SEC investigation found that BNY Mellon deviated from regulatory capital rules by excluding from its calculations approximately $14 billion in collateralized loan obligation assets that the firm consolidated onto its balance sheet in 2010. BNY Mellon never obtained Federal Reserve Board approval as required under regulatory capital rules to exclude the assets from its calculations. Due to the miscalculations and the firm’s lack of internal accounting controls to ensure its financial statements were being prepared properly, BNY Mellon understated its risk-weighted assets and overstated certain risk-based capital ratios in quarterly and annual reports from the third quarter of 2010 to the first quarter of 2014. “Regulatory capital ratios and risk-weighted assets are critical data points for investors in large banking institutions like BNY Mellon,” said Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “We will continue to aggressively focus on these kinds of disclosures to ensure that control failures do not prevent investors from receiving accurate and timely information.” Without admitting or denying the charges, BNY Mellon consented to an SEC order finding that it violated internal controls and recordkeeping provisions of the federal securities laws, specifically Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. The SEC’s investigation was conducted by Armita Cohen and Amy Flaherty Hartman and the case was supervised by Michael Osnato, Reid Muoio, and Jeffrey Shank. The SEC appreciates the assistance of the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York.