Forums

Welcome to the Sanity Check forums. You are welcome to browse the public forums, but you must be a registered user to post. If you are not a registered user, then please register. If you are a registered user, then please login.

Can't contribute to a forum?

You must be a registered user to post on these forums.

Click here to register now. If you are already registered, click here to login.

The Sanity Check Forum

Forum Home

Specific Stocks

Novastar Financial, Inc (NFI)

Hedge Fund Laws...

Hedge Fund Lawsuit 1 of 2

mhatmccane

409 posts

Joined
1/20/2006

Hedge Fund Lawsuit 1 of 2
Posted: 14 Apr 06 8:40 PM

Recommend this Post - This post has 25 recommendations	Ignore this User \| Report Abuse
LAWSUITS TARGET NAKED SHORTS - I by: smoothjazz0204	04/13/06 04:10 pm Msg: 422845 of 423127
Naked Shorts Forbes.com Liz Moyer, 04.13.06, 3:35 PM ET New York - Wall Street is circling the wagons after the first of what could be multiple lawsuits against several big firms over collusion in the prime brokerage business. Late Wednesday, Electronic Trading Group filed suit against 11 firms and unnamed individuals in Manhattan federal court, accusing them of "anti-competitive" conduct and "conspiracy" in setting excessive fees and controlling the securities-lending market. ETG, an institutional trading firm, was acquired in October by Schonfeld Group, a proprietary and retail trading operation. But by Thursday, Schonfeld representatives were already trying to distance themselves from the suit. "We want nothing to do with this," says Schonfeld President Andrew Fishman. Howard Jahre, who used to be one of ETG's biggest investors, is believed to be the individual behind Wednesday's lawsuit, which targets Bank of America, Bank of New York, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS. Jahre now runs an entity called Hedge Fund Capital Partners, though a call to his New York office went unreturned. The suit, filed on behalf of ETG by Entwistle & Cappucci, comes as another plaintiff's firm, Milberg Weiss Bershad & Schulman, is investigating pricing in the prime brokerage business. Milberg is also preparing to bring its own class-action suit against the prime brokers on behalf of hedge funds, which also believe they are being overcharged or charged for services not provided. Earlier this week, a partner at the firm would not comment on the timing of any lawsuit. Prime brokerage is the business of catering to hedge funds, particularly lending securities to funds so they can execute their trading strategies. Securities lending generates about $10 billion in fees annually for Wall Street, according to research from Vodia Group, yet its pricing structure is a complete mystery to most observers. But institutional firms like Schonfeld depend heavily on the services of Wall Street and are unlikely to want to risk damaging those ties by flinging around accusations of price collusion. Nevertheless, lawyers not connected with either the Entwistle or Milberg firms say the issue of pricing and the mechanics of the securities-lending business are ripe for investigation. One of the thorniest issues, and one which is addressed in the suit filed Wednesday, is the phenomenon known as naked short-selling and the prime brokers' hands in it. In regular short-selling, the trader borrows shares for a fee from his prime broker and sells them, hoping to buy them back later at a lower price and reap the profit on the difference. But the prime broker has to locate the shares, which then have to "deliver" or be given to the trader before the sale is executed. Cont'd...

Page 1 of 1

Specific Stocks

Novastar Financial, Inc (NFI)

Hedge Fund Laws...