SEC Charges Auto Loan Company For Misstating Past Performance

ADMINISTRATIVE PROCEEDING
File No. 3-20372

June 24, 2021 – The Securities and Exchange Commission today announced settled charges against Gateway One Lending & Finance, LLC for making false and misleading statements about the past performance of Gateway loans when offering a series of auto loan-backed securitizations.

According to the SEC’s order, California-based Gateway was in the business of originating, securitizing, and servicing auto loans. The order finds that Gateway provided investors, as well as the securitizations’ underwriters and ratings agencies, false and misleading data in connection with six auto loan-backed securitizations between July 2014 and December 2016. Specifically, the order finds that Gateway understated the historic losses of its auto loans, and overstated the loans’ projected future performance, by excluding important liquidation expenses, such as repossession and remarketing expenses. The order further finds that, because the figures Gateway provided were inaccurate, investors could not properly assess the risks of the securities they purchased, and investors collectively paid millions of dollars more for these securities than they otherwise would have.

The order charges Gateway with violating the antifraud provisions of Section 17 of the Securities Act of 1933. Without admitting or denying the SEC’s findings, Gateway consented to a cease and desist order, and to pay disgorgement of $3,915,077 plus prejudgment interest of $998,115 and a civil penalty of $1,600,000. Gateway has agreed to distribute the settlement proceeds to affected investors.

The SEC’s investigation was conducted by Jason Casey and Sharon Bryant of the Enforcement Division’s Complex Financial Instruments Unit, with assistance from Judy Bizu. Laura Metcalfe supervised the investigation.