Pressure continues mounting on Gam Investments as the Swiss stock market sounds the alarm on a “potentially material misstatement” in its accounts and threatens sanctions against the firm.
Six Exchange Regulation proposed sanctions against Gam on Wednesday for allegedly misstating its accounts in connection with its acquisition of quant business Cantab Partners in 2016.
The regulatory arm of the Swiss listing authority has accused the Zurich-based fund group of making a “potentially material misstatement” in its accounts by failing to recognise a financial liability arising from its contractual arrangement with Cantab.
The threat of sanctions is the latest blow for the Swiss fund house which has been in the spotlight since the suspension of one of its star managers Tim Haywood.
Since then the firm has suffered a tidal wave of redemptions, seen its shares plummet by 70% and endured a string of senior exits. The embattled manager also looks set to cut hundreds of jobs as current CEO Peter Sanderson (pictured) attempts to turn the business around.
Gam responds
Gam said it stands by its accounting and has filed objections to the sanction proposal.
“Gam takes its financial reporting responsibility very seriously, disagrees with the position taken by Six and stands by its previously published consolidated financial statements,” a spokesperson for the company 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.
“Gam’s position, supported by its external auditors and an independent expert, is that 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. Gam believes that this reflects a true and fair view of its financial position reported to shareholders and does not result in an income and expense mismatch.”
The clash with Six does not relate to any of Gam’s funds or clients and the accounting matter would have no impact on the group’s cash flow position, it stressed.
Should the sanctions go ahead Gam will be required to recognise the financial liability at fair value in its future financial statements and restate any impacted historical comparative amounts.
