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

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Griffin Donates $1M To Rauner's Illinois Gov. Campaign

Sep 22 2014 | 9:29am ET

Hedge fund billionaire Kenneth Griffin definitely has a dog in this race. The Citadel...

Guest Contributor

Top 5 Predicted Outcomes Of CalPERS' Hedge Fund Divestment

Sep 22 2014 | 8:35am ET

CalPERS’ announcement to divest of hedge funds has created a significant buzz...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

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.