(Bloomberg) -- Sound Point Capital Management agreed to pay $1.8 million to settle allegations by the Securities Exchange Commission that it lacked proper policies and procedures to prevent the misuse of material non-public information.
The SEC said Monday that Sound Point in 2019 sold collateralized loan obligations that included debt about which the firm possessed inside information. After the incident, the money manager didn’t do enough to prevent the potential misuse of such information, the SEC said.
US rules require investment managers to have policies to prevent the misuse of material nonpublic information. Investors can run afoul of rules when one unit of a firm has more access to information about a security than another does.
Sound Point, which trades debt and is a major participant in the market for leveraged loans bundled into securities known as CLOs, didn’t admit or deny the SEC’s findings as part of the settlement. The firm said in a statement that it has enhanced its controls and “remains committed to operating with the highest standards of governance and compliance.”
“We cooperated with the SEC in this matter, which relates to certain compliance policies and procedures, the majority of which were modified in 2019,” Sound Point said. “This matter does not include any findings of insider trading or misuse of material nonpublic information by Sound Point or its employees.”
In the settlement order, the SEC described how Sound Point’s compliance department in 2019 let one part of the firm trade CLOs that contained securities about which another unit had material nonpublic information.
Following that incident, Sound Point began conducting compliance reviews before trading Sound Point CLOs, but it didn’t establish, maintain or enforce written policies governing the pre-trade reviews until 2022, the SEC said.
--With assistance from Miles Weiss.
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