SEC: Investment firm failed to prevent misuse of PR bonds data

The Securities and Exchange Commission (SEC) has filed a complaint against investment adviser Silver Point Capital L.P. for failing to implement and enforce policies and procedures to prevent the misuse of material nonpublic information (MNPI) related to Puerto Rico bonds.

Silver Point Capital, in a separate statement, has denied any wrongdoing. The allegations focus on Silver Point’s involvement in the restructuring of Puerto Rico’s defaulted municipal bonds and the firm’s purchase of over $260 million of these bonds while a consultant with access to MNPI had extensive communications with Silver Point’s trading desk, according to an SEC statement issued last week.

Silver Point’s core strategy involves investing in distressed companies, with a consultant participating in creditors’ committees on the firm’s behalf. The SEC alleges that Silver Point failed to address the specific risks associated with the consultant’s receipt of MNPI through his participation in the committees. Specifically, from September 2019 to February 2020, the consultant sat on an ad hoc creditors’ committee for Puerto Rico’s bond restructuring and received MNPI from a confidential mediation. During this period, the consultant had more than 500 communications with Silver Point’s public trading desk without involving the firm’s compliance department. According to the SEC, that created a substantial risk that Silver Point may have misused information from the mediation in its trading of Puerto Rico bonds.