The Securities and Exchange Commission today announced settled charges against registered investment adviser Marathon Asset Management LP for failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information relating to its participation on ad hoc creditors’ committees.
According to the SEC’s order, one of Marathon Asset Management’s core strategies has been to invest in distressed corporate bonds and other similar debt in the United States, Europe, and Asia. As part of this strategy, and because of the nature of its business and its holdings, Marathon Asset Management regularly participated on ad hoc creditors’ committees where participants may receive material nonpublic information or engage advisers who are often tasked with analyzing debtors’ material nonpublic information. However, the firm failed to establish, maintain, and enforce policies and procedures that were reasonably designed to address the specific risks associated with receiving and identifying potential material nonpublic information as a result of its participation on ad hoc creditors’ committees.
“Investment advisers who regularly enter into formal or informal relationships with companies or interact with financial advisers or other consultants who do so, including through ad hoc creditors’ committees, must take into consideration those circumstances when designing their material nonpublic information policies and procedures,” said Osman Nawaz, Chief of the Enforcement Division’s Complex Financial Instruments Unit. “We will continue to monitor such relationships and, where appropriate, bring action.”
The SEC’s order finds that Marathon Asset Management violated Sections 204A and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. Without admitting or denying the SEC’s findings, Marathon Asset Management consented to a $1.5 million penalty, a cease-and-desist order, and a censure.
The SEC’s investigation was conducted by George Carotenuto and Sarra Cho, under the supervision of Joshua Brodsky, all of the Division of Enforcement’s Complex Financial Instruments Unit, with the assistance of the Enforcement Division’s Asset Management and Market Abuse Units and the Office of International Affairs.
