August 24, 2022

Bank Settles SEC Charges for Securities Valuation Violations

A bank holding company settled SEC charges for (i) failure to maintain accurate records regarding commercial real estate ("CRE") security valuations, (ii) failure to incorporate all available market data into its valuations, (iii) issuing material misstatements relating to its valuations and (iv) related supervisory failures.

According to the order, the SEC found that the bank failed to follow current generally accepted accounting principles governing the valuation of CRE certificates. The SEC stated that the bank improperly determined that there were no "observable inputs" that could be used for valuations. The SEC further stated that the bank attempted to account for the prepayment risk in a manner that was inconsistent with available market information.

As a result, the SEC determined that the bank violated SEA Sections 13(a) and 13(b)(2)(A)-(B) ("Periodical and other reports"), as well as SEA Rule 12b-20 ("Additional information"), Rule 13a-1 ("Requirements of annual reports") and Rule 13a-13 ("Quarterly reports on Form 10-Q").

To settle the charges, the bank agreed to (i) cease and desist and (ii) pay a civil monetary penalty of $1,750,000.