British hedge fund GLG settles SEC charges over inflated assets, fees

Thu Dec 12, 2013 12:39pm EST

Dec 12 (Reuters) - British hedge fund adviser GLG Partners LP and a former holding company agreed to pay about $9 million to settle U.S. regulatory charges that internal control failures had caused them to inflate a fund's assets and collect excessive fees.

The U.S. Securities and Exchange Commission alleged that GLG Partners LP had, between November 2008 and November 2010, overvalued by about $160 million, or 60 percent, a stake that one of its funds held in an emerging markets coal mining company.

Thursday's settlement arose from the SEC's Aberrational Performance Inquiry, a program that began in 2009 to analyze the performance data of thousands of hedge fund advisers and identify funds with suspiciously high returns.

GLG is now part of Man Group Plc and oversees $27.7 billion of assets, its website shows.

According to the SEC, the GLG Emerging Markets Special Assets 1 Fund had, in March 2008, paid $210 million for a 25 percent stake in the coal mining company, hoping to sell it later in an initial public offering.

According to the SEC, after the fund's independent pricing committee approved an initial $425 million valuation for the stake, GLG employees on multiple occasions got information calling that valuation into question.

But the SEC said confusion at the London-based firm over who should address this information kept the pricing committee from getting relevant details in a timely fashion.

As management and administration fees were based on net asset value, GLG collected $7.77 million of inflated or excess fees while the stake was overvalued, the SEC said.

In the settlement, GLG and its former U.S.-based holding company GLG Partners LP agreed to give up this sum, and pay $750,000 of civil penalties and $437,679 of interest. They also agreed to hire an independent consultant to review its practices. GLG did not admit or deny wrongdoing.

"Investors depend upon fund advisers to have proper controls in place to ensure that valuations and fees are not inflated," SEC associate Enforcement Director Antonia Chion said in a statement.

Matthew Dontzin, a partner at Dontzin Nagy & Fleissig representing GLG, said: "GLG is pleased that this matter was resolved, and the firm remains fully committed to maintaining robust policies, procedures and practices in line with market conventions."

The case is In re: GLG Partners Inc et al, SEC Administrative Proceeding No. 3-15641.

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