GLG fined $9m for overvaluing stake

GLG fined $9m for overvaluing stake

One of London’s largest hedge funds, GLG Partners, has been fined $ 9m after it allegedly told investors that its assets were worth $ 160m more than they really were.

The company, which oversees $ 27.7bn of assets and is now owned by Man Group, is said to have overvalued the stake it held in a coal mining company by 60pc for two years until November 2010. As a result, it charged clients higher fees than it was due.

There is no suggestion GLG deliberately ratcheted the figures upwards. America’s Securities & Exchange Commission, which levied the fine, said that the error was down to “internal controls failures”.

GLG’s “Emerging Markets Special Assets 1” fund paid $ 210m for a 25pc stake in the unnamed coal mining firm in 2008, in the hope that it would be able to make a profit if the company floated further down the road. The fund’s “independent pricing committee” later value the stake at $ 425m.

People outside the company raised concerns about the valuation with a number of GLG staff, but the message was not passed on to the committee “in a timely manner, or even at all”, the SEC said.

“There was confusion among GLG’s fund managers, middle-office accounting personnel, and senior management about who was responsible for elevating valuation issues,” it added.

Britain’s Financial Conduct Authority helped the SEC to uncover the error.

GLG did not admit or deny any wrongdoing, but said in a statement that it was “pleased that this matter is resolved”. “[We] remain committed to maintaining robust policies, procedures and practices in line with market conventions,” it said.

It will pay $ 7.7m to cover the excessive fees it charged clients as a result of the over-valuation, in addition to a $ 750,000 civil penalty and $ 438,000 in interest charges.

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