Chatham Asset Management, owner of the former American Media, Inc. and McClatchey, has settled a Securities and Exchange Commission action charging it with improper trading of certain fixed-income securities.
Chatham and founder Anthony Melchiorre agreed to pay more than $19.3 million in combined disgorgement, prejudgment interest, and civil penalties to settle the charges.
According to the SEC, one Chatham-advised client sold certain American Media (AMI) bonds while a different client purchased the same bonds through various broker-dealers from 2016 to 2018. AMI, the former publisher of the National Enquirer, is now called A360 Media, LLC,
The SEC also found that Chatham and Melchiorre “calculated the net asset values of their client funds’ holdings using pricing data that was based, in part, on the trading prices of the securities.”
This led to the net asset values being higher than they should have been during the relevant period, resulting in higher fees being charged to the clients, the SEC continues.
"As our order finds, Chatham’s trading in AMI bonds had the effect of increasing the prices of those generally illiquid securities in a way that was disconnected from economic reality," states Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement.
Miami New Times wrote that the SEC action “was covered in several financial news outlets, including Bloomberg, but McClatchy papers did not carry the story.”
Without admitting wrongdoing, Chatham and Melchiorre agreed to pay $11 million in disgorgement and around $3.4 million in prejudgment interest. They also agreed to pay civil penalties of $4,400,000 and $600,000, respectively, and to comply with prohibitions from serving in certain positions in the investment industry, pursuant to the Investment Company Act.