Key Takeaways
- • KPMG agreed to pay $224.5 million to settle a securities class action brought by Norges Bank Investment Management (NBIM) and Swedish pension fund AP7 over the collapse of Silicon Valley Bank.
- • The settlement follows more than three years of litigation in the U.S. District Court for the Northern District of California and remains subject to court approval.
- • The lawsuit alleges KPMG's unqualified audit opinions on SVB were false and misleading, and that SVB misrepresented its risk controls, liquidity and interest-rate exposure before its March 2023 failure.
- • The pension funds' suit against SVB and other defendants is ongoing, so the KPMG settlement is a partial recovery step rather than a final resolution.
Summary
Norges Bank Investment Management and Sweden's Sjunde AP-fonden (AP7) have reached a settlement with KPMG in a class-action lawsuit tied to the 2023 collapse of Silicon Valley Bank, according to the fund. Under the agreement, KPMG, SVB's outside auditor, will pay $224.5 million to resolve claims brought by AP7 and NBIM, the manager of Norway's $2.3 trillion Government Pension Fund Global. The other lead plaintiffs are the Asbestos Workers Philadelphia Welfare and Pension Fund and the Heat & Frost Insulators Local 12 Funds.
The suit, filed in the U.S. District Court for the Northern District of California, alleges that SVB and KPMG misled investors about the bank's financial position and risk controls before its collapse in March 2023. Plaintiffs argue the defendants misrepresented the strength of SVB's balance sheet, liquidity and market position, and understated the risks the bank faced if the Federal Reserve raised interest rates. The complaint specifically challenges KPMG's "unqualified auditor's reports," which it describes as "false and misleading" because the consolidated financial statements allegedly did not fairly present SVB's financial condition or follow Generally Accepted Accounting Principles.
The lawsuit further claims that SVB had serious, known problems with risk management, interest-rate exposure and access to cash, yet continued to tell investors its controls were effective. It also alleges these misrepresentations and omissions caused SVB's stock to trade at artificially inflated prices. NBIM said the bank's collapse caused significant losses for the fund and other investors.
NBIM Chief Executive Officer Nicolai Tangen said in a statement: "The settlement is an important first step toward recovering investor losses from one of the largest bank failures in U.S. history. Investor confidence depends on well-functioning markets and on investors' ability to enforce their rights."
The settlement requires court approval, and the pension funds' claims against SVB and the other defendants continue.
The suit, filed in the U.S. District Court for the Northern District of California, alleges that SVB and KPMG misled investors about the bank's financial position and risk controls before its collapse in March 2023. Plaintiffs argue the defendants misrepresented the strength of SVB's balance sheet, liquidity and market position, and understated the risks the bank faced if the Federal Reserve raised interest rates. The complaint specifically challenges KPMG's "unqualified auditor's reports," which it describes as "false and misleading" because the consolidated financial statements allegedly did not fairly present SVB's financial condition or follow Generally Accepted Accounting Principles.
The lawsuit further claims that SVB had serious, known problems with risk management, interest-rate exposure and access to cash, yet continued to tell investors its controls were effective. It also alleges these misrepresentations and omissions caused SVB's stock to trade at artificially inflated prices. NBIM said the bank's collapse caused significant losses for the fund and other investors.
NBIM Chief Executive Officer Nicolai Tangen said in a statement: "The settlement is an important first step toward recovering investor losses from one of the largest bank failures in U.S. history. Investor confidence depends on well-functioning markets and on investors' ability to enforce their rights."
The settlement requires court approval, and the pension funds' claims against SVB and the other defendants continue.
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