Bank Settles SEC Charge of Misrepresentation regarding Wealth Management Performance Metric

A bank agreed to pay a $90 million penalty to settle an SEC charge that it misrepresented the process through which it determined net new assets ("NNA"). NNA is a "metric valued by investors in financial institutions to measure success in attracting new business." The bank had disclosed that it was providing client specific asset assessments, but the bank "instead took an undisclosed results-driven approach to determining NNA in order to meet certain targets established by senior management." In addition, a former executive of the firm agreed to settle charges that he "pressured employees to classify certain high net worth and ultra-high net worth client assets as NNA despite concerns raised by employees most knowledgeable about a particular client's intent." The former executive agreed to pay an $80,000 penalty.

SEC Enforcement Director Andrew J. Ceresney summarized the mechanics of the misrepresentation:

[The firm] conveyed to the investing community that it followed a structured process for recognizing net new assets when, in fact, the process was reverse-engineered to meet targets. [The] failure to disclose this results-driven approach deprived investors of the opportunity to fairly judge the firm's success in attracting new money.