Swiss listing authority SIX Exchange Regulation has proposed sanctions against GAM amid claims that it understated liabilities from its 2016 acquisition of Cantab Capital Partners.
GAM's latest regulatory difficulties relate to its 2017 financial statements which SIX said this morning (4 December) contained "a potentially material misstatement" with regard to the treatment of a financial liability in relation to the contractual arrangements of the acquisition.
The Swiss asset management giant, which acquired Cantab in October 2016, is said to have "failed to estimate this obligation and to recognise a financial liability as of the acquisition date and at subsequent balance sheet dates".
SIX explained: "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."
While the duration of the sanction proceedings is not known, SIX said it would inform the public of the outcome of the sanction proceedings.
Should the sanction be approved, GAM would be required to recognise the financial liability at fair value and restate any impacted historical comparative amounts in its next consolidated financial statements.
In response, GAM issued a statement this morning contesting the sanction proposals, which it said relate to its recognition of future performance fee payments as a financial liability following the Cantab acquisition.
It explained: "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, however, 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".
It said 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.
GAM 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."