May 19, 2023
Ms. Countryman, Here are my firm’s comments regarding Bayerische Motoren Werke, Aktiengesellschaft, BMW of North America, LLC, and BMW US Capital, LLC (“BMW”), Administrative Proceeding File No. 3-20060. I have included our comments in the body of this email and as a PDF attachment with exhibits. Thank you very much. Chicago Clearing Corporation (CCC) offers the following comments on the Proposed Plan of Distribution in the matter of Bayerische Motoren Werke, Aktiengesellschaft, BMW of North America, LLC, and BMW US Capital, LLC (“BMW”), Administrative Proceeding File No. 3-20060. We are commenting specifically on paragraphs 15(h) and 83. Harmed investors hire CCC to recover settlement payments in class action and Fair Fund settlements. Founded in 1992 and based in Chicago, Illinois, CCC currently serves more than 2,900 institutional clients who represent over six million underlying beneficial owner accounts. We file for retail investors en masse, so if any or all our six million clients have a claim in a Fair Fund, we file and recover their proceeds for them. It is quite an arduous task. Since our inception, CCC has filed more than thirteen million individual claim forms and has recovered nearly $2 billion dollars for our clients and their underlying accounts. CCC is an integral part of the claim recovery industry and an active participant in many industry organizations like SIFMA and BDUG. Our comments regarding both paragraphs 15(h) and 83 support our clients’ desired method to recover money in BMW and in other Fair Funds. Part one: Paragraph 15(h) of the BMW Distribution Plan Paragraph 15 defines the various excluded parties, and clause h states: “15. Excluded Party shall mean: (h) Any purchaser or assignee of another Person’s right to obtain a recovery from the Fair Fund for value…” BMW’s Plan of Distribution mirrors the language that appears in several other SEC Fair Fund Distribution Plans such as the Baxter International Fair Fund (“Baxter”), Administrative Proceeding File Nos. 3-17582 and 3-17628. We believe this exclusion will eliminate the opportunity for many harmed investors to receive value from BMW. Please refer to our Baxter comments in Exhibit A. All harmed investors, whether they are part of an SEC Fair Fund or not, should have the right to assign their claims to anyone for value. By prohibiting harmed investors from assigning their claim prior to distribution, some claimants will receive $0 from the BMW Fair Fund. For example, a claimant may cease to exist prior to distribution, such as a corporate entity, a 40 Act fund, an ERISA fund, a hedge fund, or an individual investor. The only way dying entities can receive recompense is to assign their claim before their dissolution and distribute the funds to their investors, partners, pensioners, or beneficiaries. As we mentioned in our Baxter comments, the practice of assigning assets is an age-old right. Assigning class action claims has been commonplace for over twenty years in the claim recovery industry. We wonder why the SEC has decided to disallow the assignment and transfer of SEC Fair Fund claims now. If the reason is because the SEC wants to protect investors from fraudulent transactions, CCC understands and supports this goal. To alleviate the SEC’s concern, CCC would be willing to submit all CCC’s monetization bids that involve Fair Funds to the SEC. If an investor assigns their Fair Fund claims to CCC, CCC will share that information with the claim’s administrator. That way, the SEC will have a clear line of sight for all SEC Fair Fund claim assignments from offer through acceptance, ending with delivery of payment. Part two: Paragraph 83 of the BMW Distribution Plan Beginning with the Distribution Plan in SEC v. Longfin (Case No. 18-CV-2977-DLC. S.D. N. Y.), more than a dozen Fair Fund settlements have Distributions Plans using this same or similar language. “83. Distribution Payments must be made by check, electronic payment, or other payment method with the approval of the Commission staff. The Distribution Payment will be made payable to the Payee (the beneficial account owner). Any other payment arrangement must be discussed with the Fund Administrator in consultation with the Commission staff and must be authorized by the Payee. Compensation to a Third-Party Filer for its services may not be paid or deducted from the Distribution Payment.” As we stated in our comments regarding Weatherford International PLC, et al (“Weatherford”), Administrative Proceeding File Nos. 3-17582 and 3-17628, we believe that this paragraph and others like it will reduce retail participation in Fair Funds substantially and subsequently harm the exact party – the harmed investor (the “little guy”) – that the SEC is committed to protect. Please see our Weatherford comments attached as Exhibit B. For further analysis of how the prohibition in paragraph 83 in BMW and other SEC Fair Funds with similar restrictive language will hurt retail investors, how Third-Party Filers help increase participation, and why investors prefer contingency fees with Third-Party Filers, we also refer you to Exhibit A, and our comments regarding the Baxter Fair Fund. In this comment we would like to focus on the SEC’s recent Order Approving Plan of Distribution in the Matter of MagnaChip Semiconductor Corporation and Margaret Hey-Ryoung Sakai, CPA (“MagnaChip”), Administrative Proceeding File No. 3-17956. Like BMW, MagnaChip’s Plan of Distribution restricted the deduction of Third-Party fees from distribution payments. Securities Class Action Services, LLC (“SCAS”), another Third-Party claim filer, objected to the fee restrictions. The SEC rejected SCAS’ objection by stating: “The Commission has determined that the requirements of paragraphs 85 and 86, demonstrating that the preferred method of payment is directly to the Eligible Claimant and prohibiting the offset of Third-party Filer compensation from Distribution Payments, are necessary to reduce risks to the Commission’s distribution program and to harmed investors and therefore, are fair and reasonable… Congress entrusted the Commission with the responsibility of distributing Commission settlement funds, and the Commission has procedures in place to efficiently and effectively distribute these government settlement funds while protecting the funds from waste and fraud. Distribution funds should not be sent to Third-Party Filers because the Commission does not have visibility into how these funds are handled once in the Third-Party Filers’ possession. Furthermore, the Third-Party Filers are not subject to the controls and oversight procedures prescribed in the distribution plan, and all of the safeguards implemented by the Commission and Congress to protect investors can no longer protect the distribution funds once in the Third-Party Filers’ possession.” We fully support the SEC’s goal to reduce risks related to its distribution program and protect investors from waste and fraud. It also makes sense for the SEC to have full visibility into what happens to Fair Fund awards sent to Third-Party filers. With that in mind, CCC believes that we can help the SEC achieve its mission while dramatically increasing the participation rates of Fair Funds and ensuring Third-Party filers receive fair compensation for their services, both of which the current language in paragraph 83 of the BMW Plan of Distribution precludes. With that in mind, CCC proposes the following process for Third-Party Filer participation: Prior to release of Fair Funds, the claims administrator sends an allocation sheet to Third-Party Filer. This is customary practice. Third-Party Filer reviews allocation sheets and collects payment instructions from its clients. Claims administrator sends payments to Third-Party Filer. When Third-Party Filer sends payments to clients, Third-Party Filer sends a report to claims administrator showing name of recipient, amount of its filing fee, net balance to be sent to claimant, and address of where payment was sent. Once payments have been cashed, Third-Party Filer sends a report to claims administrator of those payments that have cleared. For those payments that have not cleared, the Third-Party Filer sends all proceeds (Third Party Filer’s fee and net balance of payment) back to the claim’s administrator. Third-Party Filer will provide hard copies, soft copies, and access to an online reporting portal so the claims administrator can track the movement of every SEC Fair Fund payment for every recipient. I am sure there are further details and nuances that would need to be discussed regarding the process above. However, we hope that instead of simply shutting down the delivery of SEC Fair Fund payments through Third-Party Filers because there is currently no oversight, the SEC will collaborate with us to develop processes and procedures to protect Fair Fund payments from waste and fraud while ensuring that the maximum number of harmed investors are compensated properly. Thank you for your time. If you have any questions, please let me know. Brian Blockovich President and General Counsel Chicago Clearing Corporation