SEC, NYSE Have Threatening Words For Hedge Funds, Prime Brokers

Nov 13 2006 | 6:28pm ET

Hedge funds and prime brokers got a stern talking-to from regulators today, and a warning to clean up their acts—or else.

At a hedge fund conference in New York, Securities and Exchange Commission enforcement chief Linda Thomsen said the agency will ratchet up the pressure on illegal trading and abusing clients’ trust with a flurry of lawsuits. “I expect to see activity in connection with both,” she said. “These days, the money is in hedge funds, so the potential for securities law violations is there because there is so much money there.”

Meanwhile, the New York Stock Exchange’s lead enforcer took aim at hedge funds’ potential accomplices, the giant investment banks that serve as prime brokers.

Susan Merrill told conferees that the Big Board expects banks that are part of an underwriting syndicate for secondary stock offerings will detect hedge funds selling a stock short, with plans to cover the short sale with shares to be purchased in the secondary offering.

“We do expect member firms to put that information together,” Merrill said. “There will be actions related to that if that practice doesn’t get cleaned up.”


In Depth

Don’t Overlook These 6 Hybrid Cloud Concerns

Sep 14 2017 | 6:27pm ET

Cloud-based technology solutions have made tremendous inroads into the alternative...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Cash: An Asset In Adolescence

Aug 31 2017 | 3:34pm ET

If the investment industry has a rebellious teenager in the house today, that teenager...