Firm and Owner’s failures to register prevented oversight of more than $7 billion in assets
((HedgeCo.Net) The Securities and Exchange Commission has filed charges against Concord Management LLC of Tarrytown, New York, and its owner and principal, Michael Matlin, for operating as unregistered investment advisers to their only client—a wealthy former Russian official widely regarded as having political connections to the Russian Federation.
According to the SEC’s complaint, Matlin founded Concord in 1999 to provide investment advice for compensation and to supervise and manage the client’s investments in United States-based private funds. The SEC’s complaint alleges that, from at least 2012 through March 2022, Concord and Matlin sourced, arranged, and monitored hundreds of investments, worth billions of dollars, in private equity funds and hedge funds on behalf of the client. According to the SEC’s complaint, both Concord and Matlin were required to register as investment advisers with the Commission based on their activities, but neither did. By failing to register, Matlin and Concord avoided certain legal obligations for investment advisers that protect the investing public, such as various reporting requirements and examination by the SEC. As of January 2022, Concord and Matlin allegedly managed investments for their sole client with an estimated total value of $7.2 billion in 112 different private funds.
According to the complaint, in March 2022, the United Kingdom and the European Union designated Matlin and Concord’s client a sanctioned individual and the client’s assets were subsequently frozen. The SEC’s complaint alleges that, a month prior, in February 2022, Concord and Matlin assisted the client in his attempts to redeem investments and/or sell his securities portfolio.
“We allege that Concord flouted the registration requirements of the federal securities laws for over a decade, earning more than $80 million for providing investment advice to its billionaire client during that time,” said Gurbir S. Grewal, Director of the Division of Enforcement. “By failing to register as an investment adviser, Concord not only undermined the Commission’s ability to exercise effective regulatory oversight over billions its client invested in the United States, but also skirted rules crucial to the Commission’s ability to monitor the market for abuse, including rules requiring investment advisers to adopt specific compliance policies and to maintain certain books and records.”
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Concord and Matlin with violating Section 203(a) of the Investment Advisers Act of 1940 by failing to register as investment advisers with the Commission and seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties.