The U.S. Securities and Exchange Commission (SEC) announced Monday that Marathon Asset Management LP has agreed to pay a $1.5 million fine to settle allegations that it failed to implement adequate policies to prevent the misuse of nonpublic information. The settlement addresses concerns related to Marathon’s involvement with distressed corporate debt and creditor committees.
SEC Fines Marathon Asset : SEC Allegations
According to the SEC’s cease-and-desist order, Marathon, which managed over $25 billion in assets as of June, invests heavily in distressed corporate bonds and often joins creditor committees formed to restructure the debts of financially struggling companies. Such committees have access to material nonpublic information (MNPI), which the SEC said Marathon did not adequately safeguard against potential misuse.
The SEC’s order highlights that Marathon lacked effective policies for managing risks associated with receiving MNPI during interactions with financial advisers and consultants. Specifically, the SEC noted that Marathon failed to ensure due diligence on advisers’ policies or obtain representations from them regarding MNPI handling. The firm also did not sufficiently monitor its involvement in creditors’ committees to prevent the inadvertent misuse of nonpublic information.
Case Example: COVID-19 Financial Distress
The SEC order cited a July 2020 example when Marathon analysts identified that a company facing financial distress due to the COVID-19 pandemic might struggle to meet its debt obligations, including bonds owned by Marathon. Marathon, along with other creditors, formed a committee to assist with the company’s debt restructuring. During this process, an advisory firm provided the committee with information under a nondisclosure agreement. However, Marathon did not adequately address or monitor the risk of receiving or misusing MNPI during its participation.
