U.S. regulators are reviewing whether Guggenheim Partners inappropriately steered client money into Bob Diamond’s businesses, said two people familiar with the matter.
The review is part of a broad examination of Guggenheim by Securities and Exchange Commission lawyers in Los Angeles, the people said. Guggenheim hasn’t been accused of any wrongdoing and SEC scrutiny doesn’t always lead to sanctions. There is no indication the regulator is looking into the conduct of Diamond or his companies. The review is focused on the appropriateness of Guggenheim’s investments.
Guggenheim has been a shareholder of Diamond’s African banking venture, Atlas Mara Ltd., since its 2013 initial public offering. Over time, the relationships have spread and gotten deeper, as Guggenheim mutual funds and insurers associated with the firm have invested in multiple Diamond-related companies.
The SEC is looking at whether the connections are extensive enough that -- under financial rules -- Diamond’s businesses could essentially be deemed affiliates of Guggenheim, said the people who asked not to be named because the review isn’t public.
Investment Restrictions
Fund managers such as Guggenheim are restricted from investing in related entities, protections meant to prevent firms from helping themselves at the expense of their clients. In addition to looking at ties to Diamond, the SEC also wants to know whether Guggenheim properly disclosed its Atlas connections.
Guggenheim, a sprawling enterprise known for its mutual funds, its investment banking business and its senior executive’s ownership of the Los Angeles Dodgers, has acknowledged the SEC is reviewing the firm. In a Sept. 20 interview with CNBC, Chief Investment Officer Scott Minerd said there was no reason for concern, calling the examination routine and adding that Guggenheim was cooperating.
Spokesmen for Guggenheim, Diamond and the SEC declined to comment.
The SEC’s inquiry adds to headaches for Guggenheim. Current and former employees have said the $295 billion firm is beset with rivalries and concerns that it is fracturing as top managers, including Minerd and Chief Executive Officer Mark Walter, fight over the direction of the company.
Diamond Ties