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Non-Tech : Bill Wexler's Dog Pound -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (9365)	3/11/2003 10:44:05 AM
From: N. Dixon	Read Replies (1) \| Respond to of 10293

Don't get too "giddy" Reuters Spitzer too hedge funds: You're no Wall Street Monday March 3, 9:07 pm ET By James Paton NEW YORK, March 3 (Reuters) - The hedge fund community came face-to-face with Eliot Spitzer on Monday worried the New York attorney general would come down as hard on them as he did on Wall Street's investment banks. Many left at least somewhat relieved. "The problems we see in the hedge fund industry are very different from what we see in the investment banking environment," Spitzer said, addressing hundreds of hedge fund managers, lawyers and those who clear trades and finance these loosely regulated investment pools at a meeting of the Wall Street Hedge Fund Forum in New York. "Individual examinations and prosecutions, if that word is appropriate, are the remedy here," he continued. "The industry does not deserve fundamental change." For the $600 billion hedge fund industry, Spitzer's words came as welcome relief at a time other regulators -- namely the U.S. Securities and Exchange Commission (News - Websites) -- are reviewing ways to keep closer tabs on these generally secretive funds. Last month SEC commissioners said there is a chance short-selling, a hedge fund manager's key tool for making money in all markets, may be restricted. At the same time, Spitzer left no doubt that he will go after hedge funds who are breaking the law with vengeance. He said he would aggressively pursue any allegations of wrongdoing and fraud in the hedge fund world and that the increasingly popular investments probably should be subjected to more regulation. Already his office is looking into suggestions at least one New York-based fund tried to manipulate stock prices with its own research reports. But after the speech, executives said Spitzer had eased their minds, at least partially. Spitzer said the industry, unlike Wall Street, did not need a major overhaul, noting the interests of hedge fund managers and investors are aligned. "Spitzer didn't come out pointing fingers, saying I'm done with investment banks and now I'm going to take care of the hedge funds," said a managing director of a major Wall Street firm who attended the meeting but did not want to be named. "People I think are pleasantly surprised." HEDGE FUNDS IN THE SPOTLIGHT Spitzer and other regulators are taking a closer look at hedge funds now because the funds -- once just for the super wealthy -- are lowering their investment minimums in order to attract more mainstream investors. Regulators fear average investors, like teachers and social workers, might lose their nest eggs in one fell swoop if a fund collapses. Recently several high-profile hedge funds, including ones at Beacon Hill Asset Management and Gotham Partners Management, were forced to shut down. The U.S. Securities and Exchange Commission opened an investigation into hedge funds last year, concerned about fraud in a lightly regulated industry that has grown significantly in recent years, and now Spitzer has jumped into the probe. Hedge funds seek to make money in all markets and have lured investors who are fed up with mounting losses in their mutual funds. Money management companies, meanwhile, have rolled out new products to meet the demand. Spitzer and others are looking into activities at Gotham Partners after the hedge fund company distributed alleged critical reports on the bond insurer MBIA Inc. (NYSE:MBI - News) and farm loan provider Farmer Mac, or the Federal Agricultural Mortgage Corp. (NYSE:AGM - News). It also issued a glowing analysis of Pre-Paid Legal Services (NYSE:PPD - News) last year. The company has been accused of allegedly manipulating those stocks, which moved after the company released the reports. DON'T GET TOO GIDDY Late last year, regulators announced a $1.4 billion settlement with top Wall Street investment banks aimed at protecting investors from conflicts of interest at the brokerage companies. Hedge funds, despite the distinctions Spitzer had drawn between their industry and Wall Street, cannot get too comfortable. Spitzer said hedge funds probably should disclose more about their trading activity and curb their leverage, or amount of money they borrow to try to fuel returns. Spitzer also is worried about hedge funds' efforts to market themselves to Main Street investors. At the moment, hedge funds are lightly regulated and agree to not to tout themselves publicly. At the same time, he promised to come down hard on hedge funds that are guilty of wrongdoing. "Don't get too giddy," he said. "None of this is to suggest there won't be some interesting moments down the road."