Business Week says this is an open secret on Wall Street: Prime brokers with access to information on big trades are tipping off their other traders and their hedge fund clients, allowing them to do a bit of front-running. Does this really go on? Well, it's going to be hard to prove. I am sure it goes on to an extent, especially if the prime brokerage operation and a hedge fund are owned by the same company. The people who are really suspicious are mutual funds. They stand to lose a lot as the bid and ask moves against them subtly but enough to really affect their P&L over the long-term. You have got to think that buyside players with real clout have made this an issue. If it goes on. Do prime brokers really have advance word on mutual fund orders?
Our take on this news: Duh!! Who didn't know this? The financial media does a terrible job reporting and looking into the specifics of the financial industry. CNBC is the worst!!!
Monday, July 2, 2007
Bear Stearns Blogs about hedge fund crisis
Richard Marin, the head of the Bear Stearns unit that ran its hedge funds, is a man in the spotlight. How does he deal with it? In part by writing a blog (invite only now), which the New York Times noticed and wrote about. Some choice entries: On June 23, he wrote he was "trying to defend Sparta against the Persian hordes of Wall Street." And "nothing like a good dog fight 24X7 for a few weeks to remind you why you chose the life you chose." And "the good news is that after two embattled weeks both I and my loyal staff are still standing to fight another day." His work also included some brief movie reviews. The Times chides him for taking in Mr. Brooks during the crisis over its two ailing hedge funds. Not sure how this went over with his boss. The blog was restricted to invited guests soon after it hit the press.
Our take on this news: Do we need to be blogged by an insider whose only interest in to manipulate the inquirers. We wouldn't believe a word his says!!
Our take on this news: Do we need to be blogged by an insider whose only interest in to manipulate the inquirers. We wouldn't believe a word his says!!
GLG Settles WITH SEC on Short Sales
GLG Partners Agrees to $3.2 Million Fine to Settle SEC Charges of Illegal Short Selling
London-based hedge fund GLG Partners LP will pay more than $3.2 million to settle charges that it made illegal stock trades in connection with 14 public offerings, the Securities and Exchange Commission said Tuesday.
The SEC said the company made more than $2.2 million in profits over a two-year period -- from July 2003 to May 2005 -- in illegal short sales.
Short selling involves borrowing stock from a broker and selling it immediately, with the hope of buying it back for a lower price and returning it to the broker. The profit is the difference between the price at which the stock was sold and the cost to buy it back, less any commissions and expenses.
The agency said GLG's actions violated the Securities and Exchange Act, which prohibits covering certain short sales with securities obtained from a public offering. Specifically, the law says companies may not sell such securities five business days prior to the pricing of a public offering because it could "artificially distort" the security's market value.
Although GLG did not admit or deny SEC's findings, the hedge fund agreed to a cease-and-desist order and to pay back more than $3.2 million, including profits gained, interest and civil penalties.
The company will also adopt and implement policies and procedures to comply with SEC rules, provide training to employees and designate a senior-level employee to oversee compliance.
"Foreign-based hedge funds that trade on the U.S. markets cannot turn a blind eye to compliance with the U.S. federal securities laws," Antonia Chion, associate director of SEC's enforcement division, said in a statement.
The agency's announcement comes a day after GLG said it will sell itself in a $3.4 billion reverse takeover with Freedom Acquisition Holdings Inc., a blank check company that is established to enter into a merger or acquisition.
The combined company will be called GLG partners and will trade on the New York Stock Exchange.
The deal, which is subject to Freedom shareholder and regulatory approval, is expected to close early in the fourth quarter.
Our take on this news: GLG got off quite easy. How about penalize them from doing business in the U.S. marketplace for awhile?
London-based hedge fund GLG Partners LP will pay more than $3.2 million to settle charges that it made illegal stock trades in connection with 14 public offerings, the Securities and Exchange Commission said Tuesday.
The SEC said the company made more than $2.2 million in profits over a two-year period -- from July 2003 to May 2005 -- in illegal short sales.
Short selling involves borrowing stock from a broker and selling it immediately, with the hope of buying it back for a lower price and returning it to the broker. The profit is the difference between the price at which the stock was sold and the cost to buy it back, less any commissions and expenses.
The agency said GLG's actions violated the Securities and Exchange Act, which prohibits covering certain short sales with securities obtained from a public offering. Specifically, the law says companies may not sell such securities five business days prior to the pricing of a public offering because it could "artificially distort" the security's market value.
Although GLG did not admit or deny SEC's findings, the hedge fund agreed to a cease-and-desist order and to pay back more than $3.2 million, including profits gained, interest and civil penalties.
The company will also adopt and implement policies and procedures to comply with SEC rules, provide training to employees and designate a senior-level employee to oversee compliance.
"Foreign-based hedge funds that trade on the U.S. markets cannot turn a blind eye to compliance with the U.S. federal securities laws," Antonia Chion, associate director of SEC's enforcement division, said in a statement.
The agency's announcement comes a day after GLG said it will sell itself in a $3.4 billion reverse takeover with Freedom Acquisition Holdings Inc., a blank check company that is established to enter into a merger or acquisition.
The combined company will be called GLG partners and will trade on the New York Stock Exchange.
The deal, which is subject to Freedom shareholder and regulatory approval, is expected to close early in the fourth quarter.
Our take on this news: GLG got off quite easy. How about penalize them from doing business in the U.S. marketplace for awhile?
A second Bear Stearns fund to be bailed out?
Bear Stearns' deal to bail out its High-Grade Structured Credit Fund with a $3.2 billion infusion led to concerns that the second troubled fund was due for a similar parental bailout. While the Bear fund is negotiating with lenders to avoid a collapse of the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund, at least one big-name analyst--Guy Moszkowski of Merrill Lynch--has told his clients that he does not expect another big infusion. That would be good news. Moszkowski reiterated his buy recommendation, noting that it is really cheap compared to peers. The bet now would be that the hedge fund ills are contained. There is another view that holds that Bear Stearns might make a good acquisition target right now.
Our take on this news: Tick... tock... tick... tock... tick... tock... waiting for this and other funds to collapse.
Our take on this news: Tick... tock... tick... tock... tick... tock... waiting for this and other funds to collapse.
SEC Website shows Companies on Terror List
SEC Web Site Shows Companies With Activities in Countries on State Dept. Terrorism List
The government has launched a Web site that allows investors to track whether companies have business interests in countries the U.S. designates as "state sponsors of terrorism."
The Securities and Exchange Commission on Monday introduced the site, which links to information from the companies' most recent annual reports that reference any of the five listed countries.
Iran has the most companies listed at 43, followed by Sudan at 32, Cuba with 22, 19 in Syria, and five in North Korea.
Only two companies -- U.K.-based HSBC Holdings PLC, Europe's largest bank, and Credit Suisse Group, Switzerland's second-largest bank -- had business activities in all five countries. But numerous firms, including Nokia Corp., Siemens AG and Total SA, disclosed activities in multiple countries.
"No investor should ever have to wonder whether his or her investments or retirement savings are indirectly subsidizing a terrorist haven or genocidal state," SEC Chairman Christopher Cox said in a release.
Federal law already requires companies to report on any material activities in a country on the Secretary of State's terrorism list and the SEC is now making that information "readily accessible to the investing public," Cox said.
But the existence of a disclosure does not mean that the company directly or indirectly supports terrorism or is otherwise engaged in any improper activity, the SEC said.
The site can be accessed on the "Investor Information" section of the SEC's home page at http://www.sec.gov.
Our take on this news: We believe longtime Wall Street bulldog and wealthy Minneapolis financier Richard Christenson had been advocating to do just this for years! What took so long to do this?
The government has launched a Web site that allows investors to track whether companies have business interests in countries the U.S. designates as "state sponsors of terrorism."
The Securities and Exchange Commission on Monday introduced the site, which links to information from the companies' most recent annual reports that reference any of the five listed countries.
Iran has the most companies listed at 43, followed by Sudan at 32, Cuba with 22, 19 in Syria, and five in North Korea.
Only two companies -- U.K.-based HSBC Holdings PLC, Europe's largest bank, and Credit Suisse Group, Switzerland's second-largest bank -- had business activities in all five countries. But numerous firms, including Nokia Corp., Siemens AG and Total SA, disclosed activities in multiple countries.
"No investor should ever have to wonder whether his or her investments or retirement savings are indirectly subsidizing a terrorist haven or genocidal state," SEC Chairman Christopher Cox said in a release.
Federal law already requires companies to report on any material activities in a country on the Secretary of State's terrorism list and the SEC is now making that information "readily accessible to the investing public," Cox said.
But the existence of a disclosure does not mean that the company directly or indirectly supports terrorism or is otherwise engaged in any improper activity, the SEC said.
The site can be accessed on the "Investor Information" section of the SEC's home page at http://www.sec.gov.
Our take on this news: We believe longtime Wall Street bulldog and wealthy Minneapolis financier Richard Christenson had been advocating to do just this for years! What took so long to do this?
Can an equity firm run a mutual fund?
The news that Nuveen was purchased by private equity firm Madison Dearborn Partners is yet another example of how private equity funds are increasingly going after financial services funds. Nuveen, a highly recognizable brand, says this will allow them to attract and retain talent and accelerate their product and service development plans. It will also make some people very wealthy. But you have to wonder if there's a lot of synergy between a private equity firm and mutual fund company. Madison Dearborn was willing to pay a big 20 percent premium. So it sees something. But what? The company will be loaded up with additional debt, and you have to wonder if the target will really have the wherewithal to finance the major expansion people are hoping for. It may be that mutual fund returns won't be good enough for a private equity company. But we'll see.
Our take on this news: This will be one of Madison Dearborns few mistakes. Excellent equity firm with excellent returns but this will turn out to be a blunder for them and its investors.
Our take on this news: This will be one of Madison Dearborns few mistakes. Excellent equity firm with excellent returns but this will turn out to be a blunder for them and its investors.
SEC probes into Bear Stearns hedge fund.
This is not surprising: The SEC is looking into the well-covered woes of Bear Stearn's troubled credit-oriented hedge funds. Business Week Online reports that regulators are wondering why and how the firm was able to restate the losses of one fund in April. At first, the firm said the losses were in the 6.5 percent range. Three weeks later, according to the magazine, the losses were restated to 19 percent. This is a huge problem. And many think that the reputation of CEO Jimmy Cayne is on the line. It's no surprise that Bear Stearns has had problems both in its proprietary funds and in its prime brokerage operations. This will only compound the issues. There are likely other funds in similar straights. It's fair to say that more fund blow-ups will bring more regulatory interest. You can sense the angst on the part of regulators. Their reputations are also on the line, in a way.
Our take on this news: Where was the SEC to begin with to oversee their behavior in the beginning?
Our take on this news: Where was the SEC to begin with to oversee their behavior in the beginning?
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