The Securities and Exchange Commission announced on Thursday, Sept. 24, that it had settled charges against BMW for disclosing inaccurate and misleading information about the automaker’s retail sales volume here in the United States as it raised around $18 billion from investors.
BMW — the German-based automaker BMW AG and two U.S. subsidiaries including BMW of North America and BMW US Capital — inflated its reported sales, which then helped the company decrease the gap between its actual sales and internal targets, according to a release by the SEC. The inflated sales also kept BMW in a “leading sales position” in comparison to other automotive companies.
The SEC found that BMW of North America had what was referred to as the “bank” made up of unreported retail car sales that it pulled from when it needed to meet internal targets. Not only that, but the company paid dealers to label automobiles as demonstrators or loaners so BMW could still count them as sold. The company further adjusted retail sales reporting in 2015 and 2017 for internal targets.
The information provided to investors in bond offerings by BMW and to credit rating agencies had misstatements and omissions, the SEC said.
“Companies accessing U.S. markets to raise capital have an obligation to provide accurate information to investors,” said Stephanie Avakian, director of the SEC’s division of enforcement. “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.”
BMW cooperated in the investigation, which the SEC considered in assigning a penalty.
“BMW Group is pleased to have resolved, after substantial cooperation, the U.S. Securities and Exchange Commission’s (SEC) inquiry which started in late 2019 focusing on retail sales reporting practices of BMW of North America,” said BMW Group spokesperson Phil Dilanni in a statement, adding that the issues at hand in the SEC order were from over three years ago. “The Order is based on U.S. securities laws which can be satisfied by negligence. There is no allegation or finding in the Order that any BMW entity engaged in intentional misconduct.”
“The BMW Group attaches great importance to the correctness of its sales figures and will continue to focus on thorough and consistent sales reporting,” Dilanni said.
The SEC penalized the three companies $18 million. As part of the settlement, BMW did not admit or deny the SEC’s findings.
“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,” said Anita B. Bandy, an associate director in the SEC’s division of enforcement. “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.”