BOSTON 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 Nov. 14 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. Galvins 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 secretarys 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.
Nasdaq, Wall Street firms form 144A system
NEW YORK Nasdaq and a dozen Wall Street firms are joining forces in a new system called Portal Alliance to list and trade unregistered 144A equity securities and bring transparency to that market, said Nasdaq spokesman Wayne Lee.
Nasdaq and several of these firms already launched their own platforms earlier this year but decided to create a common facility with the same standard rules to strengthen the fragmented market. The firms are: Bank of America, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, UBS and Wachovia Securities.
CBOE launches volatility, strategy indexes
CHICAGO Chicago Board Options Exchange on Nov. 12 launched a Standard & Poors 500 three-month volatility index, a VIX Premium Strategy index and the Capped VIX Premium Strategy index, said CBOE spokeswoman Debbie Baratz. The indexes quantify the potential returns of short-term volatility strategies and measure the markets expectation of 30-day volatility implicit in the prices of near-term index options.
Known as the markets fear gauge, the VIX index is the main benchmark of stock market volatility and investor sentiment. The VIX Premium Strategy index tracks a portfolio that overlays a sequence of short one-month VIX futures on a money market account. The Capped VIX Premium Strategy index tracks a strategy selling one-month VIX futures, capped by the purchase of a VIX call option.
The CBOE also revamped its S&P 500 VARB-X Strategy Benchmark index, which is based on the historical spread between implied and realized volatility.