Article: S&P Settles SEC’s Stale Valuation Charges

Article - Media, Publications

S&P Settles SEC’s Stale
Valuation Charges

Credit Suisse
Alicia McElhaney, 17 May 2021

S&P Dow Jones Indices has settled with the SEC over charges that it published stale valuations of a volatility-related index.

The Securities and Exchange Commission announced Monday that S&P had agreed to pay a $9 million fine without admitting or denying the SEC’s findings.

The regulator’s charges had centered on the S&P 500 VIX Short Term Futures Index ER, a volatility-tracking product that S&P licensed to certain issuers, including Credit Suisse, which used the S&P product for an exchange-traded note that tracked the index.

On February 5, 2018, the VIX spiked 115 percent. But between 4 p.m. and 5:08 p.m. that day, the S&P’s index allegedly remained static due to a previously undisclosed “auto hold” feature that triggered when the index breached certain thresholds.

According to the SEC order, the issue stemmed from the S&P team tasked with monitoring that index. On the day of the snafu, one of the two people responsible for monitoring the index was allegedly out of the office. The remaining staffer knew about the index’s volatility and even commented on it, the SEC said.

But at the end of the trading day, things went haywire. The employee had gotten alerts that auto holds had been activated, but did not release them or investigate their cause, according to the SEC.

The employee had been told by his supervisor that he should prioritize end-of-day validations over real-time price and index level monitoring during the last hour of trading, the SEC said.

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