On April 28, the Securities and Exchange Commission announced that it had reached a settlement with Medley Management, a publicly-traded asset manager, and its former co-CEOs in connection with charges brought by the SEC alleging that Medley Management had made misrepresentations to investors concerning its future growth potential.  In order to resolve the allegations, Medley Management and the two individual defendants agreed to pay $10 million in civil penalties to the SEC.


The SEC alleged that, over the past 5 years, Medley Management overstated its assets under management.  These overstatements were included in public filings, including bond offerings.  Medley Management allegedly made the overstatements by including “committed capital” within its assets under management, despite the fact that the clients from whom the capital was pledged allegedly did not have an obligation to invest with Medley Capital at all and allegedly did not invest with Medley Management very often.  The SEC alleged that Medley Management misrepresented the amount of risk involved with funds because they did not disclose the risk that a substantial amount of capital that was included under “committed capital” may not ever be invested with Medley Management.  As a result, the SEC alleged that Medley Management could never generate fees from that capital, which was necessary for the growth of the company.

The SEC also alleged that the former co-CEOs provided positive projections of Medley Management’s future growth despite the fact that they had no reasonable basis to make those assertions.  The projections were allegedly made in connection with a plan to sell Medley Management to clients and secure well-paying jobs for the co-CEOs.  The projections were allegedly included in proxy materials, which were sent to investors to encourage them to vote in favor of the sale.  

The defendants agreed to a consent order finding that the defendants had violated the antifraud provisions of the federal securities laws as well as the reporting and books and records provisions of the securities laws.  The defendants agreed to pay $10 million to resolve the allegations; however, they do not admit or deny the SEC’s findings.

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with SEC investigations and related securities litigation.  If you need assistance with such a matter, please contact us today.