Saturday, September 23, 2023
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SEC Raps Knuckles of Investment Advisers

WASHINGTON (CN) - Two managing partners of a Charlotte, N.C. investment advisory firm will pay $472,000, and get out of the business for a while, to settle SEC charges, the agency said.

The SEC filed an administrative order against Joseph G. Parish III and Scott H. Shannon, the principals of NIR Capital Management LLC.

The case is related to Merrill Lynch's $132 million fine and disgorgement (see "Merrill Lynch Must Pay $132 Million," on today's Courthouse News page.

NIR Capital Management was the collateral manager for the $1.5 billion CDO called Norma. As such, it was supposed to be responsible for selecting, acquiring and monitoring the collateral, which was mostly residential mortgage-backed securities and credit default swaps.

"Respondents nevertheless allowed the equity investor in Norma, a hedge fund firm consisting of Magnetar Capital LLC and its affiliates (together, 'Magnetar'), to influence the selection of Norma's portfolio of collateral," the SEC said in its cease-and-desist order. "Respondents knew that Magnetar sought to take short positions on CDO debt, in addition to its long investment in CDO equity. Respondents, therefore, should have realized that Magnetar's interests were not necessarily the same as those of potential investors in the debt tranches of Norma, whose investments depended solely on the CDO and its collateral performing well."

Shannon agreed to leave the securities business for 2 years, disgorge $140,662 in profits and interest, and pay a penalty of $116,553.

Parish agreed to quit the business for 1 year, pay disgorgement and interest of $140,662 and a penalty of $75,000.

As is customary with the SEC, neither man had to admit he did anything wrong, but they promised not to do it again.

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