Billionaire Mark Cuban has now scrutinized the SEC for only protecting Wall Street, stating “I wouldn’t trust them to do the right thing ever”.
During a Reddit ‘Ask Me Anything’ (AMA) in the WallStreetBets forum in February 2021, billionaire investor Mark Cuban expressed strong criticism of the U.S. Securities and Exchange Commission (SEC).
In a post from his verified account, Cuban stated, “The SEC is a mess.
I wouldn’t trust them to do the right thing ever.
It’s an agency created by and for lawyers to win cases rather than to act in the interest of investors.”
He further criticized the SEC for prioritizing Wall Street over the protection of everyday investors.
Cuban argued that if the SEC truly focused on investor safety, it would establish clear guidelines regarding insider trading and market manipulation.
Instead, he claimed, “they would rather litigate to regulate,” suggesting that the SEC prefers to develop rules through lawsuits, which leaves the public uncertain and favors Wall Street.
Today, the SEC remains under scrutiny.
Gary Gensler, the current chair, has been advocating for new regulations aimed at enhancing market transparency and protecting investors.
While these initiatives aim to tackle emerging risks, they have sparked controversy within the hedge fund and banking industries.
Critics argue that the new regulations can be overly complex.
The SEC chair has been unable to solve issues retail investors have been facing for decades now — much of which revolves around the manipulation of stock prices by hedge funds short on securities.
Mark Cuban’s criticism of the SEC underscores an ongoing debate regarding the agency’s role and effectiveness.
As the SEC works to adapt to contemporary financial challenges, its success will hinge on finding the right balance between enforcement and market facilitation.
Whether it can respond to retail investors and rebuild trust is still uncertain, but its efforts to evolve are essential for its future influence.
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The SEC now charges a hedge fund for compliance failures when it failed to establish and enforce policies within its insider information material.
Note: The SEC has updated their PR to charging Sound Point for ‘compliance failures’ — the title of this article previously read ‘illegal trading’.
As a result, the Securities and Exchange Commission (SEC) has charged Sound Point Capital Management LP a $1.8 million penalty.
The SEC has found that the investment management firm Sound Point violated securities laws related to the management of collateralized loan obligations (CLOs) and the firm’s access to material non-public information (MNPI).
Sound Point managed CLOs and traded its own CLOs as well as CLOs managed by third parties.
Through this work, the firm sometimes came into possession of MNPI about the companies whose loans were held in the CLOs that Sound Point traded.
While Sound Point began conducting pre-trade compliance reviews to address the potential impact of MNPI related to loans in its own CLOs in 2019, the firm did not adopt formal written policies and procedures to handle MNPI from third-party CLOs until much later, in June 2022.
The SEC emphasized that investment advisors with multiple business lines must have reasonable policies and procedures in place to address the risks of accessing MNPI, including through their roles as lenders that may expose them to sensitive information.
As a result of these violations, Sound Point has agreed to pay a $1.8 million penalty and will be subject to a cease-and-desist order and censure by the SEC.
The investigation was conducted by the SEC’s Division of Enforcement and Division of Examinations.
“Fund managers – including those with multiple business lines or strategies – must consider how they may come into possession of material nonpublic information and then adopt and implement reasonable policies and procedures around those risks,” said Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit.
“Among other things, advisers must evaluate how their roles as lenders could expose them to MNPI that may relate to their CLO trading positions.”
A spokesperson for Sound Point told FrankNez:
“We are pleased to enter into the settlement with the SEC on a “no admit or deny” basis.
We cooperated with the SEC in this matter, which relates to certain compliance policies and procedures, the majority of which were modified in 2019.
We have enhanced our controls since then.
This matter does not include any findings of insider trading or misuse of material nonpublic information by Sound Point or its employees.
Sound Point takes its fiduciary responsibilities very seriously and remains committed to operating with the highest standards of governance and compliance.
As an organization, we continue to seek ways to further enhance our policies, procedures and practices and to adapt to changes in regulation, our business and the market.”
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