Bonus, Redemption Bases For SEC Deal With Ex-Bear Hedge Fund Managers

Feb 23 2012 | 6:01am ET

The Securities and Exchange Commission yesterday explained how it arrived at the disgorgements to be paid by two former Bear Stearns hedge fund managers.

The regulator earlier this month announced that it had reached a deal with Ralph Cioffi and Matthew Tannin, who oversaw two Bear hedge funds that collapsed in 2007, costing investors $1.6 billion. Under that agreement, Cioffi will pay $700,000 in disgorgement and a $100,000 fine, and Tannin $200,000 in disgorgement and a $50,000 fine.

The disgorgement figures were based on Cioffi's 2007 redemption of $2 million from his hedge funds, and Tannin's $750,000 bonus from that year, the SEC's John Worland and Richard Hong wrote to U.S. District Judge Frederic Block. Cioffi's redemption allowed him to avoid the disgorged amount in losses, they explained.

Block must approve the settlement, which comes more than two years after the two men were acquitted of criminal charges that they misled investors in the two hedge funds. The judge has called the settlement "chump change" but indicated that he would likely approve the deal.

"The proposed settlements here are fair, adequate and reasonable," the SEC wrote, sentiments echoed by lawyers for Cioffi and Tannin.


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