Risk controls and investor disclosures at Melvin Capital Management are being investigated by the US Securities and Exchange Commission (SEC) following the fund’s mauling during last year’s meme-stock frenzy, according to a report by Reuters.
Central to the SEC’s investigation is exactly what Melvin founder Gabe Plotkin told investors after the fund lost $6.8 billion in a failed bet against GameStop. The SEC has reportedly contacted investors to try and find out whether they were misled when Melvin raised money last year.
The report cites unnamed sources as revealing that the SEC wants to know exactly what Melvin Capital disclosed to clients about the risks associated with its investment strategy.
Once among Wall Street’s most prosperous hedge funds, Melvin Capital announced in May after again incurring big losses during the stock market slump.
