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

Star Fund Managers Battered By Rocky Ride In Yields, Currencies

May 28 2015 | 6:05am ET

Some of the biggest names in the investment world have been whipsawed by the recent...

Lifestyle

Yale Receives $150 Million Gift from Blackstone’s Schwarzman

May 12 2015 | 12:10am ET

Yale University announced it has received a $150 million gift from Blackstone Group...

Guest Contributor

The Road To Tax Alpha

May 28 2015 | 5:36am ET

Tax-related alerts are increasingly helping investment managers harvest tax alpha...

 

Sponsored Content

Editor's Note