Century City-based asset manager Ares Management Corp. has been charged with compliance failures by the Securities and Exchange Commission and has agreed to pay a civil penalty of $1 million to settle the charges.
The SEC alleged that Ares failed to implement procedures designed to prevent the misuse of nonpublic information.
In 2016, according to the SEC, Ares made a “several hundred million” dollar investment in a public company, allowing it to appoint a senior employee to that company’s board. The regulator said that Ares’ compliance procedures failed to account for the “special circumstances” created by having an employee serve on a company board while continuing to participate in trading decisions regarding that company.
The SEC reported that, through this employee, Ares obtained material nonpublic information on the company’s strategy; management changes; and decisions related to the company’s assets, debt, and interest payments. Ares then purchased more than 1 million shares of the company — 17% of its publicly available stock — after receiving this information.
Ares' compliance staff did not inquire whether the Ares employee or his team had material nonpublic information prior to approving the trade, according to the SEC.
“It is critical for firms like Ares to have proper policies and procedures in place to address these risks and prevent the misuse of information obtained under these special circumstances,” SEC Associate Director in the Division of Enforcement Anita Bandy said in a statement.
Ares did not admit or deny the charges, but agreed to a cease-and-desist order, a censure and the $1 million civil penalty.
The fine is a minor penalty for Ares, which took in nearly $1.8 billion in revenue last year and holds nearly $150 billion in assets under management.
The firm beat earnings expectations for the first quarter of this year and has been the subject of generally bullish forecasts from analysts despite the impact of Covid-19 on its portfolio.
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