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Family Office’s Collapse Triggers SEC Probe | Middle-Market Public Policy Roundup

The multibillion-dollar collapse of a family office last week draws regulatory scrutiny, and a coalition of industry groups will begin pressuring Congress to break up Amazon.

Family Office’s Collapse Triggers SEC Probe | Middle-Market Public Policy Roundup

The collapse of Archegos Capital Management last week has regulators looking at family offices, with some considering hiking reporting requirements. Meanwhile, industry groups representing small businesses nationwide are banding together to pressure Congress to pass increased antitrust measures against Amazon, which could lead to increased M&A activity. Finally, the House Financial Services Committee has released its April hearing schedule. 

Family Office’s Collapse Triggers SEC Probe 

  • The sudden collapse of Archegos Capital Management last week has drawn the scrutiny of regulators, some of whom are calling for increased reporting requirements on family offices.
  • The SEC has opened a preliminary investigation into the New York-based family office, according to people familiar with the matter, which may not produce any formal allegations of wrongdoing. [Matt Robinson and Benjamin Bain, Bloomberg]
  • After some positions moved against him last week, Archegos’ investment manager, Bill Hwang, was forced to put up more collateral. Hwang ultimately faced margin calls that he couldn’t meet, prompting banks including Goldman Sachs Group Inc. to unwind his positions, and causing the office to fold. [Dave Michaels, The Wall Street Journal]
  • Reporting from The Journal estimated Archegos total leveraged positions totaled around $30 billion at the time of the collapse.
  • Credit Suisse Group AG and Nomura Holdings Inc., which served as brokers for Hwang’s wagers and lent him huge sums of money, are now warning shareholders that they face “significant” losses, The Journal reported.
  • Dan Berkovitz, a commissioner at the Commodity Futures Trading Commission, released a statement calling for increased reporting requirements from family offices.
  • “[Family offices] can wreak on our financial markets,” he said, adding: “To protect the integrity of the commodity markets, the Commission must be aware of and able to monitor the activities of large family offices.”
  • Because family offices don’t solicit investments from the public, they’re exempt from many investor protection requirements.

Trade Groups Unite to Break Up Amazon, Teeing Up Possible Spin-Offs

  • Industry groups representing thousands of small businesses across the U.S. are joining forces to confront Amazon and pressure Congress to break up the company, a move that could result in carve-outs of the e-commerce giant.
  • The group, called Small Business Rising, is expected to lobby Congress to step up on antitrust policymaking.
  • The effort is being launched by trade groups that represent small hardware stores, office suppliers, booksellers, grocers and others, along with business groups from 12 cities, organizers say. [Ryan Tracy, The Wall Street Journal]
  • Members of the House Antitrust Subcommittee are considering legislation along those lines as they weigh changes to U.S. antitrust law, though no bill has yet been introduced, according to The Journal.
  • Lawmakers from both parties, so far, remain open to cooperating on increasing antitrust regulation.
  • A report from law firm Benesch reported in February that stricter antitrust laws could lead to increased M&A activity in 2021 as large tech companies shed assets.

HFSC Releases April Schedule

  • The House Financial Services Committee released its April hearing schedule, which will include the following:
    • April 14 at 10 a.m. ET: The full Committee will convene for a virtual hearing entitled, “Building Back Better: Examining the Need for Investments in America’s Housing and Financial Infrastructure.”
    • April 15 at 10 a.m. ET: The Subcommittee on Consumer Protection and Financial Institutions will convene for a virtual hearing entitled, “Banking Innovation or Regulatory Evasion? Exploring Trends in Financial Institution Charters.”
    • April 15 at 2:00 p.m. ET: The Subcommittee on Investor Protection, Entrepreneurship and Capital Markets will convene for a virtual hearing entitled, “The End of LIBOR: Transitioning to an Alternative Interest Rate Calculation for Mortgages, Student Loans, Business Borrowing, and Other Financial Products.”
    • April 27 at 12 p.m. ET: The full Committee will convene for a virtual hearing entitled, “Member Day Hearing: Committee on Financial Services.”
    • April 28 at 12 p.m. ET: The Subcommittee on Oversight and Investigations will convene for a virtual hearing entitled, “Examining the Role of Municipal Bond Markets in Advancing – and Undermining – Economic, Racial and Social Justice.”
    • April 29 at 12 p.m. ET: The Subcommittee on Diversity and Inclusion will convene for a virtual hearing entitled, “Closing the Racial and Gender Wealth Gap Through Compensation Equity.”
Benjamin-Glick

Benjamin Glick is an associate editor of Middle Market Growth.