Deer Park Road Management Company, Lp

Allegations: ON JUNE 4, 2019, THE INVESTMENT MANAGER AND MR. BURG ENTERED INTO AN ORDER (THE "ORDER") WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). WITHOUT ADMITTING OR DENYING THE FINDINGS IN THE ORDER, THE SEC FOUND THAT FROM AT LEAST OCTOBER 2012 THROUGH DECEMBER 2015 (THE "RELEVANT PERIOD"), THE INVESTMENT MANAGER'S POLICIES FAILED TO ADDRESS SUFFICIENTLY HOW TO CONFORM THE FIRM'S VALUATIONS WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"). FURTHER, THE SEC FOUND THE INVESTMENT MANAGER'S POLICIES WERE NOT REASONABLY DESIGNED FOR ITS BUSINESS PRACTICES, GIVEN ITS USE OF VALUATION MODELS AND PRICING VENDORS, AND THE POTENTIAL CONFLICT OF INTEREST ARISING FROM TRADERS' ABILITY TO DETERMINE THE FAIR VALUE OF A PORTION OF THE POSITIONS THEY MANAGE. MOREOVER, THE ORDER STATES THAT THE INVESTMENT MANGER FAILED TO IMPLEMENT ITS EXISTING POLICY. IN ACCORDANCE WITH GAAP, THE INVESTMENT MANAGER'S VALUATION POLICY INCLUDED A REQUIREMENT TO MAXIMIZE THE USE OF RELEVANT OBSERVABLE INPUTS. DURING THE RELEVANT PERIOD, HOWEVER, THE INVESTMENT MANAGER, AT TIMES FAILED TO ENSURE THAT CERTAIN RESIDENTIAL MORTGAGE-BACKED SECURITIES ("RMBS") WERE VALUED IN ACCORDANCE WITH GAAP. SPECIFICALLY, THE INVESTMENT MANAGER MAY HAVE UNDERVALUED CERTAIN CLIENT ASSETS BY FAILING TO MAXIMIZE RELEVANT OBSERVABLE INPUTS, SUCH AS TRADE PRICES. THE SEC FOUND THAT MR. BURG WAS A CAUSE OF THE INVESTMENT MANAGER'S FAILURE TO IMPLEMENT THE VALUATION POLICY THAT REQUIRED MAXIMIZING OBSERVABLE INPUTS. Status: Final Sanction Detail: MONETARY FINE/AMOUNT: DEER PARK ROAD MANAGEMENT COMPANY, LP-$5,000,000.00. DATE PAID-JUNE 10, 2019 SCOTT EDWARD BURG-$250,000.00. DATE PAID-JUNE 10, 2019. NO PART OF THESE FINES WERE WAIVED. Summary: ON JUNE 4, 2019, THE INVESTMENT MANAGER AND MR. BURG ENTERED INTO AN ORDER (THE "ORDER") WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). WITHOUT ADMITTING OR DENYING THE FINDINGS IN THE ORDER, THE SEC FOUND THAT FROM AT LEAST OCTOBER 2012 THROUGH DECEMBER 2015 (THE "RELEVANT PERIOD"), THE INVESTMENT MANAGER'S POLICIES FAILED TO ADDRESS SUFFICIENTLY HOW TO CONFORM THE FIRM'S VALUATIONS WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") AND THAT MR. BURG WAS A CAUSE OF THIS VIOLATION. THE FIRM WAS FINED $5,000,000, ORDERED TO CEASE AND DESIST FURTHER VIOLATIONS, CENSURED AND AGREED TO UNDERTAKINGS AS DESCRIBED IN THE RESPONSE TO QUESTION 12 (B) ABOVE. MR. BURG WAS FINED $250,000 AND ORDERED TO CEASE AND DESIST FURTHER VIOLATIONS. FURTHER, DETAILS ARE PROVIDED IN THE RESPONSE TO QUESTION 7, ABOVE.