2024-01-01 SEC Press press_release 62 KB 2,310 chars

Advisory Firm Marathon Asset Management Charged with Policies Failures Regarding Potential Receipt of Confidential Information from Ad Hoc Creditors’ Committees

Release
2024-158
Caption
Securities and Exchange Commission v. George Carotenuto, et al.
Source PDF JSON
summary

Marathon Asset Management LP settled SEC charges for failing to implement policies to prevent material nonpublic information misuse during ad hoc creditors’ committee participation.

paragraph

Marathon Asset Management LP violated Sections 204A and 206(4) of the Investment Advisers Act of 1940 by failing to address MNPI risks inherent in its distressed debt strategy. The firm's participation in ad hoc creditors’ committees exposed it to sensitive data that its existing policies failed to manage. To settle the matter, the firm agreed to a $1.5 million penalty, a censure, and a cease-and-desist order.

narrative

The SEC announced settled charges against Marathon Asset Management LP for failing to maintain adequate policies to prevent the misuse of material nonpublic information (MNPI). As a firm specializing in distressed corporate debt, Marathon regularly participated in ad hoc creditors’ committees where access to MNPI is common. The SEC found that the firm failed to design procedures specifically addressing the risks associated with these committee roles. This failure resulted in violations of Sections 204A and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7. Without admitting or denying the findings, Marathon consented to a $1.5 million penalty, a censure, and a cease-and-desist order. The investigation was led by the SEC’s Complex Financial Instruments Unit.

Enriched metadata

Scheme
investment-adviser-fraud (95%)
Outcome
settled
Civil penalty
$1,500,000
Classified investment-adviser-fraud(confidence 95%). EDGAR detection: forms ADV/ADV-E/ADV-W/Form D· recall 33% / precision 13%. detection rule →
Statutes
Sections 204A and 206(4) of the Investment Advisers ActSections 204A and 206(4) of the Investment Advisers Act
Parties
george carotenutoJoshua Brodskymarathon asset managementmarathon asset management lposman nawazsarra choSecurities and Exchange Commissionthe sec’s investigation
Keywords
asset managementmarathon assetcreditors committeesmaterial nonpublicnonpublic informationassetmanagementmarathoninformationhoccreditorscommitteespolicies procedurespoliciesmaterial

Exhibits & Attached Documents (1)

Extracted insights

Dollar amounts 1
  • $1.50M $1.5 million $1M–$10M
Entities 8
  • person george carotenuto
  • person Joshua Brodsky
  • person marathon asset management
  • person marathon asset management lp
  • person osman nawaz
  • person sarra cho
  • agency Securities and Exchange Commission
  • agency the sec’s investigation
Triples 16
  • Securities and Exchange Commission Announced Settled Charges Marathon Asset Management LP
  • Marathon Asset Management LP Failed To Establish Written Policies And Procedures Reasonably Designed To Prevent The Misuse Of Material Nonpublic Information
  • Marathon Asset Management Invest In Distressed Corporate Bonds United States, Europe, And Asia
  • Marathon Asset Management Participate On Ad Hoc Creditors’ Committees Regularly
  • Marathon Asset Management Fail To Establish Policies And Procedures That Were Reasonably Designed To Address The Specific Risks Associated With Receiving And Identifying Potential Material Nonpublic Information
  • Osman Nawaz Say 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
  • Osman Nawaz Say We Will Continue To Monitor Such Relationships And, Where Appropriate, Bring Action
  • Securities And Exchange Commission Find Marathon Asset Management Violated Sections 204A And 206(4) Of The Investment Advisers Act Of 1940 And Rule 206(4)-7 Thereunder
  • Marathon Asset Management Consent To A $1.5 Million Penalty, A Cease-And-Desist Order, And A Censure
  • Securities And Exchange Commission Investigate Marathon Asset Management
  • George Carotenuto Conduct The SEC’s Investigation
  • Sarra Cho Conduct The SEC’s Investigation
  • Joshua Brodsky Supervise George Carotenuto And Sarra Cho
  • Division Of Enforcement’s Complex Financial Instruments Unit Conduct The SEC’s Investigation
  • Enforcement Division’s Asset Management And Market Abuse Units Assist The SEC’s Investigation
  • Office Of International Affairs Assist The SEC’s Investigation
PDF (from attached: pdf)
In re MARATHON ASSET · Source
Text layers
Extracted body text (2,310c) 
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.
OCR text (2,310c · html-text · 99% conf) 
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.

Related documents (1)