Massachusetts accuses Bear Stearns

Bear Stearns Asset Management was charged with engaging in improper trading activities in two of its hedge funds that collapsed during the summer.

Bear Stearns Asset Management was charged with engaging in improper trading activities in two of its hedge funds that collapsed during the summer, in an administrative complaint filed today by Massachusetts Secretary of the Commonwealth William F. Galvin.
BSAM was accused of trading securities, including mortgage-backed securities and CDOs, from its own account for the hedge funds it advised without properly notifying the funds’ independent directors, “as required by federal and state securities laws as well as its own prospectus disclosures and representations,” according to a news release from Mr. Galvin’s office.
According to the complaint, 15 to 20 investors in one of the funds — the High Grade Structured Credit Strategies fund — were individual Massachusetts investors, family trusts or partnerships.
Barring a settlement, the matter will go before a hearing officer in the Massachusetts Securities Division of the secretary’s office. Should BSAM be fined or censured as a result of that hearing, the money manager would have the right to appeal the outcome before the Massachusetts Superior Court.
BSAM spokesman Russell Sherman said BSAM is “declining to comment on this ongoing regulatory matter.”