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Delayed Quote. Delayed  - 08/28 04:02:24 pm
81.2 USD   +0.10%
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Bank Scrambles to Price Funds After Glitch

08/27/2015 | 05:17pm US/Eastern
By Kirsten Grind 

Computer problems plagued the U.S. asset-management industry for a fourth consecutive day Thursday, as Bank of New York Mellon Corp. said it was still working to correct a glitch that caused hundreds of mutual and exchange-traded funds to miscalculate the value of fund assets.

The bank said in a statement that the performance of the accounting platform it uses to price fund securities, the SunGard InvestOne platform operated by SunGard Data Systems Inc., began to improve in the early morning hours Thursday, "although some performance issues remain."

BNY Mellon, the largest fund custodian in the world by assets, provides accounting services for money managers. Those services include calculating the price of a fund's securities each day. Pricing is crucial for money managers, which are obliged to provide investors with an accurate price for securities in their funds.

The problems have made it much harder for mutual fund and exchange-traded fund investors who rely on accurate pricing to trade in and out of funds.

On Monday, the pricing system went down. It went back online midday Wednesday, the system was working through a backlog Thursday afternoon, the bank said.

In its first public statement on the matter Thursday afternoon, SunGard said that the malfunction appears to have been caused by an operating system change performed on Aug. 22. Although the change had been tested by SunGard, the platform "became corrupted," when applied to SunGard's InvestOne platform used by BNY Mellon, the company said. The backup system was concurrently corrupted.

"We at SunGard apologize to BNY Mellon for the adverse impact this unfortunate incident has had on its operations and clients," SunGard president and CEO Russ Fradin said in a statement. The company said the issue wasn't related to "the recent turmoil in equity markets."

Fund-research firm Morningstar Inc. said about 800 mutual funds were missing their net asset values on Wednesday afternoon.

On Thursday, some fund firms worked to restate the net asset values of their funds from previous days after receiving updated information from BNY Mellon. In an update to investors Thursday morning, Federated Investors said it has received net asset values for Monday, and that the values it calculated for two of its mutual funds differed from BNY Mellon's figures.

The company said it is recommending reprocessing shareholder transactions in both those funds for that day. The company is still relying on its internal valuation committee to price securities because of "a significant delay in the availability of net asset values," Federated said in a statement.

By Thursday afternoon, BNY Mellon said it had generated net asset values for affected ETFs and mutual funds for Tuesday, and had begun work to process the prices for Wednesday. The bank expected to finalize net asset values for Wednesday by Thursday night. After that, the bank said it would work on net asset values for Thursday.

"Teams continue to work around the clock," the bank said in an earlier statement.

In a separate afternoon statement, the bank said it continued to have "an open dialogue with the regulators and exchanges to keep them apprised of the current status of this situation."

The outage, unprecedented across the money-management industry, affected a number of firms offering mutual funds and ETFs, including Goldman Sachs Group Inc., Prudential Financial Inc., Guggenheim Partners LLC. and Voya Investment Management. By Thursday afternoon, multiple fund companies were reporting discrepancies of 1% or more in the prices they had calculated earlier in the week compared with the new prices from BNY Mellon.

Invesco PowerShares, a large provider of ETFs, revised the net asset value of 14 funds, according to a news release.

SEC officials reviewing the pricing glitch are aware of only a few instances of price discrepancies greater than 1% of what they should have been, according to people familiar with the agency's review of the matter. They cautioned the figures are preliminary stages.

Write to Kirsten Grind at kirsten.grind@wsj.com

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