Mass. Sues Bear Over Collapsed Hedge Funds

Nov 15 2007 | 7:37am ET

William Galvin, the Massachusetts secretary of the commonwealth and bête noire of the hedge fund industry, has Bear Stearns in his sights.

Galvin sued Bear Stearns Asset Management yesterday, alleging that it failed to notify investors and independent directors of two collapsed hedge funds about conflicts of interest. The complaint accuses the firm of trading securities from its own accounts with the High-Grade Structured Credit Strategies and High-Grade Structured Credit Strategies Enhanced Leverage funds without letting clients know in writing and receiving their consent.

“Investors who sought to take advantage of the inimitable risk management reputation of Bear Stearns found themselves in a highly-complex hedge fund investment program that relied on overworked junior personnel to manage a conflict reporting process required by federal law,” the complaint says.

In addition, Galvin said that a former director of the funds failed to respond to subpoenas he issued.

“Investors are entitled to know when their investment adviser has some stake in the other side of the deal,” he said in a statement. “The cavalier attitude that this company had about its various conflicts of interests in intolerable.”

Galvin is seeking unspecified damages.

The High-Grade Structured Credit funds collapsed this summer, victims of the subprime slide. Both invested in mortgage-backed securities.


In Depth

Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud

Dec 21 2014 | 10:30am ET

Texan Allen Stanford first appeared on the radars of financial regulators in 1997...

Lifestyle

Hedgie Funds US Squash Program

Dec 24 2014 | 8:46am ET

Squash, anyone?

Guest Contributor

EidoSearch’s Top Three Market Projections For 2015

Dec 23 2014 | 4:03am ET

It is that time of year again when prognosticators make their big market calls for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.