SIX Exchange Regulation has proposed sanctions against GAM for allegedly understating liabilities from its acquisition of Cantab Capital Partners.
SIX said that GAM, in its 2017 financial statements, made a misstatement about the financial liability of the acquisition, Investment Week reported.
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The Swiss asset management giant acquired Cantab in October 2016.
SIX said: “It is SIX Exchange Regulation AG’s view that financial liabilities are understated in the balance sheet of the 2017 annual financial statement of GAM Holding AG and that a potentially significant revaluation effect has not been recognised in the income statement.”
SIX said that it will disclose the outcome of the sanction proceedings.
If the sanction is approved, GAM will be required to recognise the financial liability at fair value.
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By GlobalDataThe company will also be required to restate impacted comparative amounts in its next consolidated financial statements.
GAM contests SIX sanction proposals
GAM said that the proposals relate to its recognition of future performance fee payments as a financial liability following the acquisition.
In a statement, GAM said: “When GAM acquired Cantab, 40% of all future performance fees were retained by Cantab’s previous partners.
“SIX argue that this arrangement gave rise to a financial liability, which should have been measured at fair value and recognised as a financial liability at the time of the acquisition and subsequently re-measured each year, with any changes in value being recognised in GAM’s consolidated income statement.”
The company added: “No financial liability should be recognised until performance fees crystallise, at which point any liability to pay those fees is recognised and reflected in its consolidated financial statements along with a matching performance fee asset.”
The company claimed that this reflects a true and fair view of its financial position reported to shareholders.
The Swiss asset management firm said: “GAM takes its financial reporting responsibility very seriously, disagrees with the position taken by SIX and stands by its previously published consolidated financial statements.
“It has therefore filed reasoned objections to the sanctions proposal.”
Last month, GAM group head of investments Matthew Beesley announced the decision to step down.
