SEC, Silver Point Capital have deal to drop case

Securities and Exchange Commisison headquarters exterior
The SEC is dropping a case alleging Silver Point Capital traded Puerto Rico bonds on material nonpublic information.
Bloomberg News

The U. S. Securities and Exchange Commission expects to drop its case against Connecticut-based hedge fund Silver Point Capital, L.P., for failing to have written policies and procedures in place requiring the chaperoning of conversations between Chaim Fortgang, a legal consultant, and the firm's investment professionals.

The SEC and Silver Point filed a joint motion for a stay Thursday in the case before the U.S. District Court for the District of Connecticut to allow the Commission to approve the parties' "agreement in principle" to dismiss the case with prejudice.

The agreement also provided for Silver Point's waivers and releases and the commission's formal approval.

"Silver Point Capital is pleased that the enforcement staff of the SEC has agreed, subject to commission approval, to dismiss its lawsuit against the firm with prejudice," Silver Point said in public statement. "There was absolutely no basis in the evidence or the law for the claims asserted by the SEC, and the SEC should never have filed this action in December 2024."

The SEC said Silver Point failed to establish, implement, and enforce written policies reasonably designed to prevent the misuse of material nonpublic information. The charges focused on the behavior of Chaim Fortgang, who Silver Point had hired as an outside consulting attorney.

Fortgang, who has since died, represented Silver Point in negotiations related to Puerto Rico's debt restructuring in 2019 and 2020. 

Silver Point netted a profit of $29 million from the Puerto Rico bonds it bought in late 2019 and early 2020, the SEC said.

Since Fortgang was an experienced and respected attorney and only gave legal advice to members of the firm, neither he nor the firm did anything wrong, Silver Point said.

"Silver Point seeks to always operate with the highest ethical standards and to maintain best-in-class compliance policies and procedures," Silver Point said in a statement. "We are focused on moving forward and maintaining a positive, productive and collaborative relationship with the SEC that we have worked to establish since the firm's inception."

An SEC spokesman declined to comment beyond the joint filing for a stay.

According to a Barron's story posted Thursday, "In place of the 'overly ambitious' regulatory agenda pursued by Biden administration Chairman Gary Gensler, [Acting Chairman Mark] Uyeda said he expects the Republican-led SEC to focus on its 'normal' mission of protecting investors and promoting capital markets." The U.S. Senate has yet to vote on Trump-nominee Paul Atkins to serve as the SEC's permanent chairman.

The SEC in 2021 censured a McKinsey & Co. affiliate and ordered it to pay $18 million to settle allegations that MIO Partners had access to material nonpublic information about issuers, including Puerto Rico, while it was overseeing investments that included the issuers' securities.

Correction
Correcting to indicate Silver Point already executed an agreement in principle.
March 07, 2025 4:58 PM EST
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SEC enforcement Compliance Politics and policy Puerto Rico Hedge funds Public finance
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