The Securities and Exchange Commission is investigating whether traders spread rumours in order to manipulate share prices and has ordered more than two dozen hedge funds to submit trading
The Securities and Exchange Commission is investigating whether traders spread rumours in order to manipulate share prices and has ordered more than two dozen hedge funds to submit trading information. The US regulator has identified six financial institutions whose shares it believes may have subject to manipulation.
In a summary judgment, a Florida federal judge has ruled that Michael Lauer, founder of Greenwich, Connecticut-based hedge fund manager Lancer Management Group, defrauded investors of USD500m. The SEC has accused Lauer of overstating the value of his two funds, manipulating prices of seven securities, and giving investors false financial statements.
The Financial Services Authority has threatened to impose unlimited fines on investors that breach its new short-selling ban on 32 UK banks and insurance companies. Prime Minister Gordon Brown has said that permanent rules may be implemented to curb short selling once the FSA’s temporary ban expires in January. Hedge funds have also been asked to disclose their existing short positions and early indications are that some funds have struggled to provide the information.
The declaration for hedge funds on short position have revealed that Paulson & Co, the hedge fund manager that bet extremely successfully on the sub-prime mortgage market collapse last year, was among the biggest short sellers of UK banks, with positions totalling USD1.9bn. The FSA, which was joined in banning the shorting of financial stocks by the US, Ireland, Luxembourg and other jurisdictions, has turned down requests from non-banking firms to have their shares added to the no-shorting list.
There have been reports – although no concrete action – that some of world’s biggest hedge funds may group together to sue the FSA for losses incurred as a result of the ban. There are reports that some highly leveraged funds could blow up in the coming weeks if the restriction renders their investment strategy unworkable. Meanwhile, Man Group – one of the world’s largest listed hedge fund managers – has requested that it be added to the no-shorting list.
The administrators of Lehman Brothers could be subject to a series of legal actions from the investment bank’s hedge fund clients because Lehman, which is in bankruptcy proceedings, has blocked assets in its prime brokerage accounts. London-based RAB Capital has hired law firm Simmons & Simmons, which is seeking to recover a total of GBP22bn in assets.
Stung by the credit turmoil, 3i Group, Europe’s largest listed private equity firm, saw asset sales decline 45 per cent in the five months to the end of August, to USD1.2bn, and made GBP622m in new investments, down 39 percent from same period a year ago. The sudden drought in the debt financing that fuelled a two-year buyout boom is partly responsible for the woes currently facing private equity firms.
T. Boone Pickens, the Texas oil mogul and hedge fund manger, has lost USD1bn this year. One of his energy funds is down 30 per cent up to the end of August, while a smaller commodity fund tumbled 84 percent.
Avenue Capital is raising 1.5bn euros for a new fund that will invest in distressed debt in the US and Europe. Marc Lasry’s firm manages USD20.3bn and is 20 per cent owned by Morgan Stanley.
Kohlberg Kravis Roberts has hired Makram Azar as a managing director to establish a presence in the Middle East and North Africa. He will develop and distribute KKR products in the region as well as source transactions and investment opportunities. Azar spent 18 years at Lehman Brothers, most recently as a managing director and global head of sovereign wealth funds and chairman of media investment banking for Europe and Middle East, based in Dubai.
