Friday, February 16, 2007

Another take on that Bear Stearns/Manhattan Investment Case -- Marketwatch

The key points...

Industry ramifications are huge. A number of big brokerages are deeply dependent on hedge fund business. If a client hedge fund goes belly up, their prime broker really, really does not desire to be held liable to the investors. There will be an appeal. A quote, " 'It was a shock to many on Wall Street,' said Robert Heim, a former Securities and Exchange Commission lawyer now in private practice. 'If it's allowed to stand on appeal it's going to heighten the responsibility brokers have over their hedge fund clients.' "

Or maybe it would just motivate the prime brokers to reduce the aggressiveness or the amount of leverage the hedge fund uses? Or maybe, the brokerages could send around some auditors every now and then to keep their hedge fund clients' numbers honest?

Bear Stearns loses one for the prime brokers - MarketWatch



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