Massachusetts Regulators Accuse Bear Stearns of Fraud - Wall Street Journal
By JENNIFER LEVITZ
November 14, 2007 10:38 a.m.
Massachusetts securities regulators filed a complaint accusing Bear Stearns Cos. of fraud for allegedly improperly trading with two in-house hedge funds that collapsed this summer.
Regulators in the office of Secretary of State William F. Galvin say in the administrative complaint that Bear Stearns traded mortgage-backed securities for its own account with the hedge funds without notifying the funds' independent directors in advance.
Advance disclosure of principal trades is required to make sure trades are fair for ionvestors. The failure of the two mortgage-related funds, Bear Stearns High-Grade Structured Credit Strategies Fund and High-Grade Structured Credit Enhanced Leverage Fund, cost investors $1.6 billion. Massachusetts believes it has standing on behalf of state residents invested in the funds.
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