SEC Busily Issuing Slaps On The Wrist - Dealbreaker

By some measures (well, one, anyway), it looks like the Securities and Exchange Commission is really getting tough on financial crime while under quarantine. And the increase in whistleblower awards would seem to point in that direction. But a look under the hood shows that the impressive total haul was pretty much a volume play. And for all of its hyperactivity, the SEC doesn’t seem to be extracting a particularly punishing levy from those it has now gotten around to dealing with.

For instance, the allegations against private equity firm Ares Management look pretty damning. The firm invested nine figures in a company and got a board seat out of it. Said board member, as such board members are wont to do, kept Ares in the loop about what was going on at the company, and after one such head’s up, Ares bought up another million shares. It seems, to this lawyer’s eye, anyway, like a colorable case of insider trading. But the SEC thought otherwise, instead seeing a case of not following your own rules.

Ares Management LLC has agreed to pay $1 million to settle allegations that it bought stock in one of its portfolio companies while an Ares employee sat on that company’s board and had access to inside information.

The Securities and Exchange Commission announced the settlement Tuesday, saying the stock purchases violated the private-equity firm’s compliance policies….

Los Angeles-based Ares has a compliance policy that requires such stock trades to be reviewed and approved by compliance staff, but the SEC said the policy “failed to account for the special circumstances presented by having an employee serve on the portfolio company’s board while that employee continued to participate in trading decisions regarding the portfolio company….”

With about $149 billion under management, publicly traded Ares is among the largest private-equity firms to be penalized by the SEC in recent years.

That’ll teach’em.

SEC Fines Ares Management $1 Million for Compliance Failures [WSJ]


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