SEC intensifies probes of European fund managers

Questions over valuations of illiquid assets draw scrutiny as mainstream investors increasingly seek alternative investments

The SEC is intensifying its oversight of fund managers that are licensed to do business in the US but regulated in Europe, according to media reports.

The US regulator has been increasingly scrutinizing firms in London and elsewhere as part of an apparent drive to verify the pricing of certain assets and oversee increasing investments by retail investors in hedge funds and other alternative investments, reports the Financial Times.

‘It has not done much internationally but I suspect it will be coming pretty regularly,’ a senior figure at a London-based firm managing insurance-linked securities told the FT after receiving a visit from SEC officials. ‘[The officials] met six or seven managers in London. I think we will increasingly find the SEC will say, We need to look people in the eye and ask whether they have the right motivation. Coming and doing more inspections of firms that are [UK] regulated but SEC registered will become more commonplace.’

Much of the SEC’s focus is on valuation of assets, such as collateralized loan obligations, which are thinly traded, the paper says, citing several hedge fund industry professionals and consultants. Valuations can be seen as subjective because a market value for the assets is hard to determine independently without a ready supply of buyers.

In December last year the SEC charged London-based hedge fund GLG Partners and levied a penalty of $9 mn on accusations it had overvalued an investment in a coal mining company by $160 mn and improperly increased its fees by $7.7 mn. The SEC also ordered the firm to hire an independent consultant to recommend new procedures for valuating assets. The firm neither admitted nor denied guilt in the matter.

‘On a number of occasions, GLG employees received information calling into question the $425 mn valuation for the coal mining company position,’ the SEC said in a press release at the time. ‘But there were inadequate policies and procedures to ensure such relevant information was provided to the independent pricing committee in a timely manner, or even at all.’

0 comments

You must be registered to comment.

Please Sign In or Register.

Is your IR site a security liability?

Read the latest white paper from Business Wire to learn how to address key areas of vulnerability for investor relations websites. Ibrey Woodall, senior vice president of web communications services, shares her insights into three essential elements of a secure IR site: internal workflow, technical compatibility and security awareness and diligence.

Download the report here >>

About Business Wire

Leading companies turn to Business Wire, a Berkshire Hathaway Company, for the tools they need to quickly, broadly and effectively communicate their financial news to all stakeholders, including investors, analysts and the media. From material news disclosure, IPO services and webcasting services to investor relations websites, market impact reports and CSR distribution, Business Wire offers the most secure and trusted platform for financial news dissemination.

We use cookies to make our website function properly and deliver our services. By using our website, you agree to our use of cookies, please click here to learn how to manage and delete cookies.