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Biotech / Medical : Biotechnology Value Fund, L.P. -- Ignore unavailable to you. Want to Upgrade?

To: RRICH4 who wrote (282)	9/26/1998 8:08:00 PM
From: greentree	Read Replies (1) \| Respond to of 4974

I'd appreciate the thread's comments on a question of fund manager ethics, and potential SEC disclosure and insider trading violations on this HYPOTHETICAL case study. Background: A biotech fund manager (and principal) has owned an equity position in a small biotech company for some time. The investment has performed poorly, but the fund manager insists he likes the science, supports management's strategic plan, and is a long term owner of the company's shares. The company comes under pressure from a new 10% shareowner in a battle for control of the Board. The greenmailer is less-than-astute about biotech, and goes so far as to call the portfolio of biotechnologies developed by the company in question "worthless". The biotech fund manager has regularly expressed his faith in this same portfolio of biotechnologies. Situation: The biotech fund manager had volunteered to support the management of the aforementioned company in its efforts to fight off a hostile greenmail effort by the new 10% shareholder. The biotech fund manager actually goes so far as to offer to do proxy solicitation for the company. It is factually clear that the biotech fund manager's vote will decide the proxy battle either for or against current management and the current Board. On the day of the Board meeting, the fund manager buys 100,000 more shares of the company's stock. Outcome: At the Board meeting, the fund manager declines to vote his shares on only ONE issue on the ballot -- the pivotal issue of the change of Board control. On all other issues he votes with existing management. As a result of his non-vote, the company loses the proxy fight, and a new Board and management team takes over control of the company immediately. Questions: 1. Did the fund manager have any responsibility (legal or ethical) to honor his commitment to support the company? 2. Did the fund manager breached his fiduciary duties to his fund's shareholders by not voting on an issue which is critical to their investment? 3. Did the fund manager trade on "inside" information by buying shares knowing his non-vote would materially effect the value of the company? 4. Was the fund manager trying to cover his tracks by amending his 13D filings (after the fact?) to allow this kind of "management" of his positions? 5. In the event that the fund manager turns out to have made an under-the-table "agreement" with the greenmailer, did the fund manager breach his fiduciary duties to his fund's shareholders? 6. If the fund manager turns out to be a future investment banker for the company, or earns fees for arranging for the new management to buy or sell part or all of the company through him, has the fund manager breached his fiduciary duties to his fund's shareholders? I'd appreciate your input. . .