BNY Mellon agrees to pay Massachusetts $3 million over computer glitch

The Bank of New York Mellon agreed to pay $3 million to Massachusetts after an investigation found a computer glitch on the firm’s part failed to calculate net asset values for more than 1,000 mutual funds, according to commonwealth officials.

BNY Mellon hired a third-party vendor, Pennsylvania subcontractor SunGard InvestOne, to calculate net asset values, but during a weekend in August last year, there was a malfunction because of a system upgrade. A probe by the Massachusetts Securities Division discovered that BNY Mellon did not have a backup plan, which resulted in untimely and non-uniform information being sent to funds and clients, according to officials.

Financial institutions like BNY Mellon are expected to oversee their third-party vendors and have backup plans if the vendor’s system fails,” Secretary of the Commonwealth William F. Galvin said in a statement. “This is particularly important when the third-party vendor performs a critical business function that impacts mom and pop investors.”

“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,” said Kevin Heine, a BNY Mellon spokesman. He also said the firm did produce net asset values manually.

BNY Mellon has since incorporated supervisory procedure changes, and has made whole any funds or investors who suffered losses.