Washington D.C., Jan. 12, 2017 —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.