The U.S. Securities and Exchange Commission fined an in-house asset manager, who invests the wealth of McKinsey’s top consultants around the world, $ 18 million for failing to bar the group’s partners from ” use the information they have accessed in the course of their work for clients.
The subsidiary, MIO Partners, was investing hundreds of millions of dollars in companies that McKinsey advised, the SEC said. Some of McKinsey’s partners who oversaw its investments “have also had access to important non-public information through their work as McKinsey consultants.”
The fine is the latest costly blow to the reputation of the world’s largest management consulting firm, which has spent more than $ 600 million to settle claims related to its work for US opioid manufacturers. McKinsey previously paid the US Department of Justice $ 15 million to settle allegations that it failed to disclose conflicts of interest in the bankruptcy cases, while MIO Partners paid $ 39.5 million l last year to settle a class action lawsuit concerning the management of his pension fund.
Earlier this month, US prosecutors indicted a McKinsey partner with securities fraud on suspected insider trading, alleging he had “exploited his access to material non-public information” to make a profit of 450 $ 000 before a $ 2.2 billion acquisition by its client, Goldman Sachs.
Rajat Gupta, a former global managing partner of McKinsey, was sentenced to prison for insider trading more than 10 years earlier.
The SEC order, released Friday, said McKinsey partners who oversee MIO’s investment choices regularly had access to confidential information about their clients’ financial results, transactions and funding plans.
However, he added, MIO “did not have policies and procedures reasonably designed to meet the dual role of McKinsey consultants involved in MIO’s investment choices.”
In one instance, the SEC said, a McKinsey partner’s access to confidential information “created a risk” that one of McKinsey’s units could influence the company’s bankruptcy reorganization plan. in a way that promotes MIO.
The MIO neither admitted nor denied the SEC’s findings, but accepted a cease-and-desist order and censorship, as well as a fine of $ 18 million.
The SEC fine follows revelations by the Financial Times in 2016 that McKinsey operated a secret inside investment fund that raised questions about how information obtained through the advice influenced investment decisions.
Jay Alix, a rival US restructuring specialist, also alleged conflicts of interest in McKinsey’s advice to insolvent companies, noting that his internal fund had invested in some creditors.