Newsletter Signup

Search Our Blog

Massachusetts Securities Department Investigates Funds' Accounting Problems

By Erwin J. Shustak, Esq.  of Shustak Reynolds & Partners, P.C. posted on Tuesday, September 15, 2015.

Massachusetts Secretary of the Commonwealth, William Galvin, responsible for policing the state’s securities laws, announced his office sent letters to Bank of New York Mellon Corp., which provides third-party services to fund companies, and six top assets managers as part of an investigation by his office “to address concerns that individual investors may have suffered losses” if they were unable to trade funds “at accurate prices.”  The six asset managers involved are Goldman Sachs Group Inc., Deutsche Bank AG, First Trust Portfolios, Guggenheim Partners, Prudential Financial Inc. and Federated Investors Inc.

On August 22nd, a full accounting platform used by BNY Mellon collapsed during routine maintenance. That system crash delayed accurate accounting of the value of billions of dollars funds issued by at least 46 fund companies, Galvin said.  

The delays and mispricing forced BNY Mellon and SunGard, the system developer, to work around the clock to deliver accurate pricing to its clients. They've also been an enormous embarrassment for the mutual fund and exchange-traded fund industries, casting a spotlight on the accounting, technology and other so-called back-office operations that support an industry responsible for $33 trillion in savings globally.

The investigation sheds light on one of the dirty dark secrets of the investment world. Accurate pricing and a smooth operating trading and pricing system is almost totally dependent on less than perfect computers and electronic data bases.

Shustak Reynolds & Partners, P.C. has extensive expertise and experience in the areas of securities, financial services and business law. For more information contact Erwin J. Shustak, Esq, Managing Partner, at 619.696.9500 or via email at [email protected]

Share This Article linkedin