Massachusetts Secretary of the Commonwealth William Galvin said the New York trust bank had subcontracted the calculations to a third party and lacked a backup plan when the sub-contractor was unable to calculate net asset values for the funds. The lack of the plan "represents a departure from high standards of commercial honor," the settlement agreement states, according to Galvin's office.
The glitch unsettled broad parts of the fund industry last summer and highlighted how reliant BNY Mellon remained on a patchwork of technology platforms.
The outage left BNY Mellon unable to calculate net asset values on the funds for about 66 clients by the close of trading on Aug. 24, according to a statement by Galvin's office, which added that BNY Mellon has since improved its internal controls and supervisory procedures.
BNY spokesman Kevin Heine said the bank is unaware of any investor losses tied to the problems and that it calculated net asset values with other means that day. Where funds requested it, shareholder transactions were reprocessed with system-generated net asset values and the bank waived any reprocessing fees, he said.
"While we truly regret any confusion our clients may have experienced during the initial hours of the outage, the fact remains that BNY Mellon took decisive action during an unprecedented vendor failure to protect our clients’ interests and deliver daily net asset values to the funds in accordance with their instructions," Heine said.
(Reporting by Ross Kerber in Boston; Editing by Marguerita Choy)