Fraud In The Sub Line Market – Should We Be Concerned?

In recent weeks, news of the JES Global Capital fraud committed by fund manager Elliot Smerling has come to light. Unfortunately, we live in world where fraud, much like death and taxes, is inevitable.

Some commentators have stated that the sub line market is "shaken" by this news. While this may be the usual media hype, as this is the first known fraud to occur in the subscription line market, we understand some lenders, at least, are reviewing internal procedures and due diligence processes to look to ensure that the commitments securing the subscription facilities they have written exist.  Indeed, investors in funds may also be seeking similar assurances so that they are not 'on the hook' for the commitments of a defaulting investor.