Tue, 27 Oct 2020

WASHINGTON, DC - German automaker BMW has agreed to pay $18 million to settle claims it misled and deceived investors subscribing to $18 billion worth of corporate bonds the company was issuing.

The Securities and Exchange Commission (SEC) announced the settlement on Friday.

BMW AG and two of its U.S. subsidiaries are accused of inflating reported retail sales in the U.S. over a period of four years when the capital-raisings were occurring.

According to the SEC's order, from 2015 to 2019, BMW inflated its U.S. retail sales, which helped BMW close the gap between its actual retail sales volume and internal targets and publicly maintain a leading retail sales position relative to other premium automotive companies.

The order found that BMW maintained a reserve of unreported retail vehicle sales - referred to internally as the "bank" - that it used to meet internal monthly sales targets without regard to when the underlying sales occurred. The order also found that BMW paid dealers to inaccurately designate vehicles as demonstrators or loaners so the company would count them as having been sold to customers when they had not been sold. Additionally, the order found that BMW improperly adjusted its retail sales reporting calendar in 2015 and 2017 to meet internal sales targets or bank excess retail sales for future use. As a result, according to the order, the information that BMW provided to investors in several corporate bond offerings by BMW's U.S. financing subsidiary, BMW US Capital LLC, and to credit rating agencies contained material misstatements and omissions regarding BMW's U.S. retail vehicle sales.

"Companies accessing U.S. markets to raise capital have an obligation to provide accurate information to investors," Stephanie Avakian, Director of the Division of Enforcement said Friday. "Through its repeated disclosure failures, BMW misled investors about its U.S. retail sales performance and customer demand for BMW vehicles in the U.S. market while raising capital in the U.S."

The SEC's order noted significant cooperation by the company during the investigation despite challenges posed by the COVID-19 pandemic, and that this cooperation was taken into account in imposing a penalty.

"This settlement illustrates the significant benefits to companies for providing concrete cooperation that substantially advances the quality and efficiency of our investigations once contacted by agency staff," Anita B. Bandy, an Associate Director in the Division of Enforcement said Friday. "As we continue to vigorously pursue wrongdoing during the COVID-19 pandemic, companies wishing to receive credit should be forthcoming in their approach to cooperation."

Without admitting or denying the order's findings, the three companies agreed to pay a joint penalty of $18 million and to cease and desist from future violations of these provisions.

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