SEC Sues Head of Collateral Manager for Omissions in Structured Product Offering Docs
The SEC has filed an action against the Managing Director of the registered investment adviser that served as the collateral manager for failed structured products. The SEC alleges that the defendant participated in marketing and preparing marketing materials without disclosing that a hedge fund also participated in the collateral selection process and sold many of the securities short. The SEC charges that the defendant was partially motivated by his desire to obtain employment with the hedge fund. The fund sponsor agreed to pay over $150 Million to settle charges related to the offerings.
OUR TAKE: The SEC is on firm ground when it posits that the offering documents and pitch books should have disclosed the hedge fund’s participation in the collateral selection process. It is less clear whether an employee of the firm responsible for collateral selection has securities fraud liability for material omissions.