The hedge fund firm founded by billionaire Daniel Och has finally put one of the industry's biggest scandals behind it — quietly.
Seizing on a business-friendly shift at the Securities and Exchange Commission during the Trump administration, Och-Ziff Capital Management Group Inc. has persuaded the regulator to lift a punitive sanction that was imposed on the firm in the wake of a multiyear investigation into bribery in Africa.
The relief, secured last month with the help of an ex-top SEC lawyer, removes a restriction that made it difficult for Och-Ziff to raise money for hedge funds. It's a big win. While Och-Ziff has been able to solicit investors' cash for other products, largely missing out on hedge funds — and their lucrative fees — has weighed on the firm. Since Och-Ziff's 2016 SEC settlement, its multistrategy hedge funds have suffered about $19 billion in net outflows.
During the Obama administration, Och-Ziff was told that getting its punishments waived was basically off the table, according to people familiar with the matter. But turnover at the SEC, capped by the January departure of a Democratic commissioner who often sparred with Wall Street, paved the way for the firm to get a reprieve.
The move comes as the financial industry broadly benefits from the deregulatory agenda that has swept through Washington under President Donald Trump. While administration officials say the lighter touch has jump-started the economy, Democrats in Congress argue that banks and asset managers are escaping tough oversight.
Spokesmen for Och-Ziff and the SEC declined to comment.
Och-Ziff's predicament stemmed from tough but little-known SEC rules. When financial firms get sued by the regulator, automatic punishments kick in that make it hard for them to obtain fresh capital. For years, the SEC routinely gave companies waivers from the additional penalties, making the sanctions all but irrelevant. That changed after the 2008 financial crisis when Washington's sentiment toward Wall Street soured and the agency started facing criticism for granting the exemptions.