CORRECTED-SEC probes B. Riley deals with client tied to failed hedge fund - Bloomberg News
(Corrects paragraph 7 to clarify context around share movement; drops incorrect reference to mark down in the value of its equity portfolio)
Jan 22 (Reuters) - U.S. authorities are investigating B. Riley Financial's deals with a client who was linked to a securities fraud, and the use of his assets to help the investment bank obtain a loan from Nomura Holdings, Bloomberg News reported.
The U.S. Securities and Exchange Commission (SEC) has carried out interviews in recent months about B. Riley and its relationship with Brian Kahn, according to the report on Sunday, citing people familiar with the matter.
Kahn is one of two co-conspirators named by co-founder of hedge fund Prophecy Asset Management John Hughes who last year pleaded guilty to securities fraud, Bloomberg had reported earlier.
"At no time during my former business relationship with Prophecy did I know that Prophecy or its principals were allegedly defrauding their investors, nor did I conspire in any fraud," Kahn has said previously in a statement to Reuters.
SEC officials have been scrutinizing how Kahn led a buyout of Vitamin Shoppe owner Franchise Group last year in a deal arranged by B. Riley, the Bloomberg report said. It added that Nomura partly financed the transaction, with some of Kahn's assets pledged as collateral.
B.Riley and the SEC did not immediately respond to Reuters' requests for comment on the report.
Shares of B. Riley had plummeted in November after it disclosed unrealized investment losses and S&P Global Ratings downgraded a key asset. (Reporting by Akanksha Khushi in Bengaluru; Editing by Rashmi Aich and Dhanya Ann Thoppil)
