Guggenheim Partners Investment Management agreed to pay $20 million to settle charges of failing to disclose a $50 million loan to a senior executive from an advisory client, the Securities and Exchange Commission announced Monday.
The settlement, which does not include an admission or denial of guilt, also covers other violations, including advisory fees charged on non-managed assets due to inaccurate coding, unreported flights on clients' private planes, and having insufficient compliance policies and procedures, according to the SEC order.
The focus of the settlement is the July 2010 loan made by an advisory client. That loan allowed the Guggenheim executive, who was not identified by the SEC, to participate in an acquisition of a privately held company. Corporate parent Guggenheim Partners LLC, which led the deal, failed to disclose the loan in two investment transactions, according the SEC.
The Guggenheim executive is still with the parent organization.
According to the order, multiple senior officials at Guggenheim and the parent company knew of the loan, but none informed the firm's compliance staff, or disclosed the potential conflict of interest to other clients involved in the transactions.
The $20 million penalty “reflects the significance of this and other regulatory failures,” said SEC enforcement director Andrew J. Ceresney in a statement. “As fiduciaries, investment advisers must be vigilant about disclosing all material facts to their clients, including actual and potential conflicts of interest.”
A Guggenheim Partners Investment Management spokesman said in a statement that since 2010 the firm has implemented “new, comprehensive, best-practice compliance policies, procedures and controls, including those that address the issues set forth in the SEC settlement,” and that no clients were harmed by the issues cited in the order.
