đź’µ McKinsey In Hot Water With The SEC

Call it a case of double-dipping: the SEC has fined a McKinsey affiliate that manages money for the consulting firm’s employees citing improper use of information. The SEC claims that the McKinsey Investment Office (or MIO) invested in companies McKinsey partners were advising, and then made investment decisions based on privileged knowledge from those partners. The SEC doesn’t outright claim insider trading, but is fining MIO $18 million for compliance violations.

  • McKinsey claims it and MIO “are operationally separate and follow strict policies to limit information sharing,” reports Bloomberg Law. While MIO stated it has strengthened its protocols to be “squarely in line with best practices in the industry.”

  • As NBC News notes, its unusual for McKinsey to have an in-house retirement fund manager. Other consulting firms, for example, use third-party money managers to oversee their retirement funds.

Past Violations

This is not the first time McKinsey has gotten into trouble with the SEC, or even the first time it has done so because it has skirted insider trading rules. According to Bloomberg Law, McKinsey’s former global head was convicted in 2012 for being part of an insider-trading ring. Then, in 2019, the company settled with the regulatory agency for $15 million following claims it didn’t properly disclose investment actions during bankruptcy cases it advised.

The Verdict

An $18 million fine is a regulatory slap on the wrist for McKinsey/MIO, and just another one in a string of anemic actions on the SEC’s part. Is the SEC avoiding the term “insider trading” here for technical reasons, or for fear of something else?