The Wall Street Journal reported Thursday that the American securities regulator is investigating Melvin Capital Management’s risk management and investor disclosures after the hedge fund was severely damaged by the meme-stock rally last year. According to the article, which cited persons with knowledge of the situation, the Securities and Exchange Commission (SEC) has been in touch with the hedge fund’s investors recently and is looking into whether the company misled them when it raised money last year. According to sources, SEC got from Melvin, which has mainly refunded its clients’ money, a copy of its general interactions with investors, and information about what the firm revealed to clients regarding the risks of its investment plan. SEC Inquiry In Initial Stage Since the inquiry is still in its early stages, formal allegations of wrongdoing may not be made. According to the sources, the asset-management branch of the enforcement division in Washington, D.C., is in charge. The SEC and other criminal enforcement authorities have looked into the frantic trading in early 2021 that sent shares of GameStop Corp. and other companies skyrocketing. It was impossible to determine whether the more extensive investigations and Melvin’s SEC investigation were connected. $6.8 Billion Loss Suffered By Melvin Melvin suffered a loss of $6.8 billion, or more than half of its assets under management, in January 2021 due to a coordinated ...
