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To: FritzV who wrote (91037)	11/10/2002 5:48:45 PM
From: long-gone	Respond to of 116906

SEC: Hedge Fund Lied to Investors Thu Nov 7, 4:07 PM ET By DEVLIN BARRETT, Associated Press Writer NEW YORK (AP) - A hedge fund company misled investors by claiming solid gains even as its funds began to lose more than half their value, the Securities and Exchange Commission (news - web sites) charged Thursday. Quote Data provided by Reuters The SEC filed a civil fraud complaint in Manhattan federal court charging Beacon Hill Asset Management "provided false or misleading information to investors" to hide "massive portfolio losses." The SEC said it had reached an agreement with the company to establish stricter oversight requirements while the investigation continues. Beacon Hill also released a statement saying it had agreed "to effect an orderly transition of the funds to a new investment manager, pursuant to an agreement with the SEC." Hedge funds use leveraging and complex trading methods — including short selling and investing in commodities, foreign currencies or troubled companies' debt — to achieve gains no matter what the market does. The SEC's complaint charges Beacon Hill claimed to investors through the spring and summer of 2002 that its Bristol and Safe Harbor funds were earning around 9 percent. In September, the company told its broker, Bear, Stearns & Co., that the funds' total value was roughly $756 million, according to the SEC's papers. Bear, Stearns responded by telling the company the funds held only $256.9 million, the papers say. Beacon Hill told investors in early October the funds' value had plummeted 25 percent — but authorities say even that didn't reveal the full scope of the losses. "It was not until Oct. 17, 2002 that Beacon Hill disclosed much greater losses than it had previously reported," the lawsuit charges. ADVERTISEMENT The company told investors the funds had declined by 54 percent from its reported value just two months earlier. But the SEC charges those losses actually began earlier, and the company misled investors about the true state of the funds — exaggerating its gains and then low-balling the losses. The SEC launched a probe of the hedge fund industry in May, noting "the information we have about them is sketchy." One area of focus is how hedge fund managers, whose pay is tied to fund performance, value holdings, since investors must often rely solely on their word. story.news.yahoo.com