Without private fund rule, SEC picks up pace on MNPI scrutiny (FundFire)

The SEC recently charged a private fund manager for failures in its firm policies to adequately protect against risks associated with receiving material non-public information (MNPI). The settlement with Marathon Asset Management is another in a string of SEC enforcement cases occurring after the SEC’s new private fund rules were struck down by the US Fifth Circuit Court of Appeals. The case against Marathon involved its participation in a creditor committee for an overseas issuer in a distressed debt deal where there was access to confidential information. Amy Lynch, FrontLine’s Founder and President, states that the case is notable since the SEC regularly focuses on creditor committees as part of its examinations of private funds. The SEC cited the failure of the firm’s policies to protect against the risk of inadvertently receiving the information through its access to the creditor committee, and according to Ms. Lynch, the SEC knows the risk of inside information is higher when firm personnel serve on these committees. This latest enforcement action shows that the SEC plans to continue its close scrutiny of how hedge funds and private equity firms manage confidential information in business transactions. See FundFire (subscription required), “Marathon to Pay $1.5M to Settle SEC Action Over Distressed Debt Lapse”