Core Viewpoint - The SEC lawsuit against Medallion Financial Corp. (MFIN) and its COO Andrew Murstein is nearing resolution, with increasing pressure on the defendants to settle and implement governance changes to restore investor confidence [1][2][4]. Legal Proceedings - Judge Lewis Kaplan denied the majority of MFIN and Murstein's motion to dismiss the SEC lawsuit, which alleges inflated asset values, fraud, and other violations [2]. - A co-defendant, Larry Meyers, has reached a settlement with the SEC, potentially leaving MFIN and Murstein to face the charges alone [2]. - The SEC has indicated progress in settlement discussions with MFIN and Murstein, with a deadline set for February 25, 2025, to finalize any agreements [2]. Financial Implications - MFIN has reportedly spent approximately 18.9 million in 2022 and 2023, significantly above historical averages [16]. Governance Recommendations - ZimCal Asset Management has proposed several governance changes to MFIN's board, including declassifying the board, separating the roles of chairperson and CEO, and appointing an independent director as chairperson [5]. - Other recommendations include establishing a mandatory retirement age for board members, reducing family control on the board, and initiating an independent investigation into Murstein's behavior [5][6]. Accountability Measures - ZimCal has urged MFIN to enforce its own policies regarding accountability for executive conduct, particularly in light of the SEC lawsuit [6][7]. - The company's Compensation Recoupment Policy, which allows for clawback of compensation in cases of financial restatement or detrimental conduct, has been called into question due to recent changes that appear to protect Murstein [7]. Strategic Focus - ZimCal emphasizes the need for MFIN to resolve the SEC lawsuit as a critical first step towards improving the company's governance and restoring shareholder value [8].
ZimCal Demands Medallion Financial Corp Board Protect Stakeholders in SEC Lawsuit