More on those the "good samaritans" seem to ignore. Nah, no incentive, to put artificial pressure on stocks to insure those returns, to justify the huge fees and perks, and perhaps "incentives" to wormie associates that hit the boards????
Hedge Funds' Gift Grabs
Case Against UBS Offers a Window On Broker Perks
By JOHN HECHINGER
June 28, 2007; Page C3
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BOSTON -- Massachusetts regulators accused Swiss banking giant UBS AG of improperly providing below-market office space, low-interest personal loans and other perks to Boston-based hedge-fund executives if they steered enough business to UBS.
The administrative complaint, part of a previously disclosed investigation, was filed by the Massachusetts Securities Division against UBS's U.S. brokerage arm. The complaint offers a look at some of the deals that brokers are providing hedge funds, the lightly regulated investment vehicles for the wealthy. Hedge funds are sought-after clients because they often trade rapidly and pay high commissions.BIG MONEY PERKS
• The Issue: Brokers eager for lucrative trading business are giving special perks to hedge funds, which are sought-after clients.
• The News: Massachusetts securities regulators allege that UBS AG improperly offered below-market rent and other perks to Boston hedge funds.
• The Future: Regulators are expected to put such arrangements under further scrutiny to see if investors are being hurt.
Gift-Giving?
Massachusetts officials maintain the below-market rent and other perks are gifts, which must not exceed $100 in value under rules established by the National Association of Securities Dealers. The state alleges that UBS also violated a broad Massachusetts law prohibiting "dishonest and unethical" business practices.
According to the complaint, UBS provided the perks only if the hedge funds did a certain amount of business with the firm -- and would withdraw the inducements if they didn't -- an arrangement that regulators said amounted to an improper "quid pro quo."
The state is seeking to stop the alleged practices and an unspecified fine. A UBS spokeswoman declined to comment.
In January, Secretary of the Commonwealth William Galvin, who oversees the Massachusetts Securities Division, launched the investigation as part of a broader examination of what have come to be known as "hedge fund hotels." In such set-ups, big investment houses offer office space and other services to hedge funds.
Red Sox Tickets
Along with space, UBS provided free office furniture, a full-time receptionist, Internet access and free meals, including daily breakfast and lunch on Fridays, state officials said. Some hedge-fund executives also received tickets to Red Sox-Yankees games at Boston's Fenway Park, the complaint said.
Mr. Galvin says that such arrangements aren't disclosed to hedge-fund investors, including pension funds, university endowments and charitable foundations. In the view of state officials, hedge funds have a fiduciary responsibility to their customers to choose brokers based on cost and service. If, instead, they are awarding their business in exchange for gifts to executives, investors in the hedge funds may not be getting the best deals available in the market. The state didn't charge any hedge-fund advisers with wrongdoing, but a person familiar with the matter said some remain under investigation.
Confidence Issue
"Investors in Massachusetts, even those whose investments are in less regulated hedge funds, are entitled to have confidence that the fiduciary dealings of hedge fund advisors and prime brokers are conducted without the cloud of conflict of interest over them," Mr. Galvin said. "UBS did not provide that confidence."
The Massachusetts complaint focuses on hedge funds that operate out of One International Place, a high-end location in Boston's financial district whose lobby features a courtyard with trees and a waterfall. From 2004 through 2006, UBS incurred losses on the below-market rental of office space that totaled $1.4 million, according to the state. In each of those years, 16 to 19 hedge funds received discounted space, the complaint said.
The state mentioned three hedge-fund advisers who received office space: Par Capital Management Inc.; Feingold O'Keeffe LLC; and Delta Partners LLC. Par executives also received favorable terms on personal loans, the complaint said. Officials at Par and Feingold declined comment. Delta Partners didn't return messages.
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