By allowing such arrangement, MIO Partners exposed McKinsey’s clients to ongoing risk of misuse of their material nonpublic information. The firm failed to reasonably address the risks associated with its organizational structure, according to the SEC.
The SEC stated that MIO Partners willfully violated Section 204A and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7.
MIO Partners offered to settle without admitting or denying the findings of the SEC. The firm agreed to pay $18 million penalty. It also consented to the entry of a cease-and-desist order and a censure.
In a statement, SEC Division of Enforcement Director Gurbir Grewal said, “Allowing individuals who may possess or have access to material nonpublic information also to have oversight over investment decisions that may benefit them economically presents a heightened risk of misuse.”
He added, “It is crucial that investment advisers have robust compliance policies and procedures in place to address the risks inherent to their organizational structures.”
