BK Bank of New York Mellon Corporation

The U.S. fund industry was in turmoil Wednesday as executives scrambled to respond to a computer glitch that prevented dozens of mutual and exchange-traded funds from promptly pricing their securities.

The outage, which wasn't believed to be related to the market turbulence Monday that included the largest-ever intraday decline in the Dow Jones Industrial Average, prompted emergency meetings Wednesday at banks, fund companies and financial intermediaries, as directors and executives sifted through pricing data and addressed likely legal ramifications of any mispricings.

The promise of accurate, readily available pricing lies at the heart of the industry's pitch to investors and any problems could have significant implications for the industry, analysts said.

Bank of New York Mellon Corp. said it was having problems with a SunGard Data Systems Inc. system that "has impacted a limited number of fund accounting clients and the processing of net asset values of certain mutual funds and ETFs," a spokesman said in a statement Wednesday. Bank of New York Mellon acts as a custodian for asset management firms, providing accounting services that include calculating the price of the funds' securities each day. The company relies on SunGard's software system to calculate those prices.

The problem, which began earlier in the week, has affected a number of large mutual fund firms, including Federated Investors, Prudential Financial Inc., Guggenheim Partners LLC and Voya Investment Management.

Monday's trading turmoil, which saw more than a thousand shares halted, unleashed wild trading in the ETF universe in which some investors complained they were unable to buy or sell securities. And the glitch was the latest example of an unexpected technology problem reverberating across the market.

Many of the recent glitches have taken place inside stock exchanges. NYSE halted trading on its exchange for nearly four hours in July after a software update caused problems. Trading continued on other exchanges, but it highlighted issues around the fragility of the technology infrastructure on Wall Street.

The ETF pricing outage set off alarm bells in mutual fund firms, where pricing issues are rare, say analysts and experts, and mistakes can carry broader implications for investors. It's the first widespread issue that asset managers have faced in at least a decade.

"Funds have very sophisticated systems for dealing with this, so it doesn't happen very often," said Niels Holch, the founder of the Coalition of Mutual Fund Investors.

Executives used back-up accounting systems for calculating the net asset values of their funds. Emergency meetings were called with each mutual funds' board of trustees, a group of independent directors that is involved in the pricing of fund shares. At BNY Mellon, executives were holding multiple conference calls throughout the week with affected fund companies, according to people familiar with the calls.

"The SunGard system became available with limited capacity late yesterday. Our teams have been working together to clear the backlog and we are working with SunGard to resume normal processing as soon as possible," the bank said.

By early afternoon Wednesday, some fund companies had received correct net asset values from Bank of New York Mellon and were trying to reconcile those numbers with what they had reported earlier in the week, according to people familiar with the process. In a statement Wednesday morning, First Trust Advisors L.P. said that the net asset values it had reported on four of its exchange-traded funds contained errors greater than 1%. A First Trust spokesman didn't immediately return a call for comment.

Guggenheim Partners LLC, which offers 64 ETFs to investors, said it had to use older data from previous days because of the problems with Bank of New York Mellon's systems.

"Once we receive actual net asset values from our third-party administrator, adjustments will be made and reposted to our website, as necessary," said Ivy McLemore, a spokesman for Guggenheim.

In a statement, Federated Investors said it has experienced a "significant delay in the availability of net asset values" for dozens of its mutual funds. The problems could result in a need to reprocess trades, the company said.

A Voya spokesman said in a statement said that it was unable to publish net asset values for its registered investment funds and commingled funds where it serves as a trustee. The company is "working closely with BNY Mellon" to publish net asset values for Tuesday and Wednesday. "Voya has been providing investors and its intermediary partners periodic updates during the situation," the company said.

A SunGard spokesman didn't return calls for comment. A spokeswoman for Prudential declined to comment.

Write to Kirsten Grind at kirsten.grind@wsj.com and Bradley Hope at bradley.hope@wsj.com

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(END) Dow Jones Newswires

August 26, 2015 13:55 ET (17:55 GMT)

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