SEC Enforcement

Dealing with an errant partner caught "marking the close"

Client:

A private, rapidly growing investment management firm

Overview:

An inquiry into suspicious trading by a partner was launched by a foreign stock exchange. Within days, the matter was referred to the U.S. Securities & Exchange Commission which notified the firm that the partner was suspect of "marking the close" and trying to manipulate prices in certain stocks. With $12 billion in assets under management, our client needed to move fast and assure its clients their money was safe.

Strategy and Plan:

Immediately, N&A advised the firm to put the partner on administrative leave and issue a statement that demonstrated the matter was being taken seriously and it was cooperating with investigators. To avoid the client's greatest risk (that clients would withdraw assets immediately), the agency prepared an intensive client-outreach communications plan that included letters, phone calls, and personal visits. In some cases, where losses were recorded, the firm immediately reimbursed clients. N&A also worked diligently to manage news coverage locally, regionally, nationally and internationally.

Results:

By the time the SEC completed its investigation, the client had already implemented a significant portion of the N&A communications plan. Only two clients withdrew assets. News accounts of the investigation, as well as its resolution, largely remained minor matters and were only one-day stories. After the dust had settled, the client's assets under management actually grew by 30 percent, in large measure because of how this organization communicated with clients during their crisis.