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Monday, June 17, 2024 | Back issues
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Investment Adviser Settles|With SEC for $1.6 Million

WASHINGTON (CN) - Aladdin Capital Management will pay $1.6 million to settle charges that it lied to clients that it was investing with them in collateralized debt obligations, the SEC said.

The SEC filed a cease-and-desist order Monday against Aladdin Capital Management and Aladdin Capital LLC. It said in a statement that Aladdin agreed to pay $1.6 million to settle the charges, and that a former Aladdin executive, Joseph Schlim, agreed to pay $50,000 "to settle charges against him for his role in the misrepresentations."

Aladdin, based in Stamford, Conn., had about $20 billion under management during the relevant time period, the SEC said in its cease-and-desist order. The money "consisted predominantly of cash and synthetic CDOs, collateralized loan obligations ('CLOs'), several credit hedge funds, and separately managed accounts. Aladdin Management's typical practice was to act as the collateral manager for CDOs and CLOs underwritten by major investment banks," according to the complaint.

According to an SEC statement announcing the settlement: "Aladdin Capital Management asked in one marketing piece, 'Why is an investor better off just investing in Aladdin sponsored CLOs and CDOs?' It then emphasized that the 'most powerful response I can give to your question is that Aladdin co-invests alongside MAST investors in every program. Putting meaningful "skin in the game" as we do means our financial interests are aligned with those of our MAST investors.' Aladdin Capital Management in fact made no such investments in either CDO, and its affiliated broker-dealer Aladdin Capital collected placement fees from the CDO underwriters."

A fine of $1.6 million comes to 0.08 percent of Aladdin's capital under management.

Aladdin and Schlim agreed to pony up without admitting to the allegations, the SEC said.

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