The Securities and Exchange Commission reported settled charges for revealing incorrect and deceptive information about BMW‘s retail sales volume in the U.S. against Germany-based automaker BMW AG and two of its subsidiaries in U.S., thus raising about $18 billion (Rs. 1,32,872 crore) from investors through various corporate bond deals.
BMW exaggerated its reported retail sales in the U.S. from 2015 to 2019, according to the SEC’s order, which helped BMW narrow the gap between its real retail sales volume and internal goals and publicly retain a leading retail sales position compared to other premium automotive firms.
The order found that BMW of North America LLC (BMW NA) held a pool of unreported purchases of retail cars, internally referred to as the “bank,” which it used to reach internal monthly sales targets regardless of when the actual sales happened. The order also found that BMW NA paid dealers to falsely classify vehicles as demonstrators or loaners so that although they had not been, BMW would classify them as having been sold to clients. Furthermore, the order finds that in 2015 and 2017, BMW NA inappropriately changed the retail sales reporting schedule to meet internal sales expectations or store surplus retail sales for potential use. As a consequence, according to the order, there were material errors and omissions about BMW’s U.S. retail vehicle sales in the details presented by BMW to investors in the bond deals by BMW’s U.S. funding subsidiary, BMW US Capital LLC, and to credit rating agencies.
Stephanie Avakian, Director of the Division of Enforcement said, “Companies accessing U.S. markets to raise capital have an obligation to provide accurate information to investors.” Avakian further added, “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 order of the SEC states the valuable cooperation of BMW during the investigation in the light of the difficulties posed by the COVID-19 pandemic, involving travel restrictions, work-from-home orders and closures of offices, and that this cooperation has been taken into account in the imposition of a penalty.
Anita B. Bandy, an Associate Director in the Division of Enforcement said, “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.” Bandy further said, “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.”
The SEC ‘s order finds that the anti-fraud provisions of Sections 17(a)(2) and (3) of the Securities Act of 1933 were violated by BMW AG, BMW NA, and BMW US Capital. The three businesses decided to pay a collective settlement of $18 million without acknowledging or denying the findings of the order and to refrain and abstain from future infringement of these provisions.
The SEC investigation was undertaken with the assistance of Kristen Dieter, Kevin Gershfeld, and Alex Lefferts by Nishchay Maskay, and was monitored by Fuad Rana and Ms. Bandy.
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