In an unconventional turn of events, the private squabbles of Wall Street firms and their regulators have spilled over into the public sphere. Chatham Asset Management, the $6 billion hedge fund headed by Anthony Melchiorre, has brought its advisers into the spotlight by inciting a legal duel to the tune of $100 million against them.
In a legal case that has piqued the interest of both corporations and law firms alike, Chatham is insisting that Adviser Compliance Associates, an external consulting firm crafted by ex-regulators, compensate for not just Chatham’s settlement costs associated with a US inquiry in the past year, but also for the operational damage that it has incurred.
The claim submitted by the hedge fund maintains that the consultant failed to inhibit trading practices that ended up conflicting with the parameters set by the authorities.
Last April, Melchiorre and Chatham conceded to paying over $19 million to settle with the Securities and Exchange Commission.
Such a legal move is unorthodox for operations on Wall Street, where complaints against penalties or regulatory actions are more often handled behind closed doors. Although it remains a rare sight for advisers and consultancies to be involved in publically held legal disputes, this case could set a precedent for future engagements between Wall Street firms and their advisory counterparts.
More details on this ongoing case can be found on this Bloomberg report.