BROWSE BY TOPIC
- Investments - Strategies
- Investor Protection
- Investments - Private
- Investments - Unsuitable
- Regulatory Sanctions
- Rules & Regulations
- Bad Advisors
- Bad Brokers
- Boiler Rooms
- Wall Street News
- Terminations/Cost Cutting
- Compliance Concepts
- General News
- Donald Trump & Co.
- Big Banks
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
RIA/PE Firm Fined $1Mn for (‘Politically Correct’) Compliance Failures
by Howard Haykin
Ares Management LLC, a Los Angeles-based private equity firm and registered investment adviser, agreed to pay $1 million to settle SEC charges that it failed to implement and enforce policies and procedures reasonably designed to prevent the misuse of material nonpublic information.
ACCORDING TO THE SEC. In 2016, Ares invested several hundred million dollars in client funds in a public company through a loan and equity investment that allowed Ares to appoint 2 directors to the company’s board. As one of its 2 representatives on the board, Ares appointed a senior member of the Ares “deal team” involved in the investment.
From time to time following Ares’ investment, the ‘Ares Representative’, along with other members of the deal team, received information from the company that posed a risk that it could be material non-public information. Specifically, Ares obtained potential material nonpublic information about the company, including through Ares’s representative on the company’s board, relating to:
- changes in senior management;
- adjustments to the company’s hedging strategy; and,
- decisions with respect to the company’s assets, debt, and interest payments.
After receiving this information, Ares purchased more than 1 million shares of the company’s common stock, which was 17% of the publicly available shares.
COMPLIANCE POLICIES FAILURES. Ares’s compliance policies failed to account for the special circumstances presented by having an employee serve on the company’s board while that employee continued to participate in Ares’ trading decisions regarding the company. So, even though Ares placed the company on its Restrict List, Ares’ compliance staff failed to comply with policies and procedures designed to prevent misuse of information arising from circumstances where Ares personnel obtained board seats for a public company.
i.e., Ares did not require its compliance staff, prior to approving the trades, to sufficiently inquire and document whether the board representative and members of his Ares team possessed material nonpublic information relating to the portfolio company.
Had Chinese Wall procedures been in place, the Ares' Representative would have had to limit his involvement in the firm's trading decisions as they pertained to this company. That limitation would likely have prompted Area to select someone else to serve on the company's board of directors.