Can I realistically link just one more time to the IHT without making The Daily Caveat their front page? I guess so. Make it worth my while and click through to read about the SEC's issues with Perry Capital's alledged disclosure violations. Perry, which has a solid pedigree having been founded by former Goldman Sachs parter Richard Perry, had recieved a wells notice from the SEC indicating that the regulator is considering action against the fund:

Hedge fund faces SEC action in takeover fight

By Andrew Ross Sorkin
The New York Times
JANUARY 11, 2006

The Securities and Exchange Commission has notified Perry Capital, a large hedge fund company, that it intends to take action against the firm, accusing it of violating disclosure rules when it used an unusual trading technique last year to try to influence a takeover battle, the company said.

Perry, which was founded by a former Goldman Sachs partner, Richard Perry, received what is known as a Wells notice, which describes the SEC's complaint. Before a case is brought, Perry has the right to argue its case to the agency.

The case stems from a complex hedging technique that Perry used to buy a voting stake in a company without holding the same economic interest in the company. Perry used the technique to try to influence the outcome of a takeover battle for King Pharmaceuticals, a generic drug maker, waged by a larger rival, Mylan Laboratories.

The firm appeared to have set up a sophisticated swap trade with Bear Stearns and Goldman Sachs so that it controlled about 10 percent of Mylan's votes, with limited or no exposure to fluctuations in Mylan's share price.

The maneuver made Perry the largest, if indirect, shareholder of Mylan, and could have helped ensure that Mylan would receive enough shareholder votes to approve the deal for King at a time when the next-biggest shareholder of Mylan, Carl Icahn, was trying to block the merger.

If the deal had been completed, Perry stood to make more than $28 million, based on figures in a filing with the SEC. After the trading technique was reported, Icahn filed suit against Perry, contending that the firm had been manipulating the stock. Perry's hedging technique and Icahn's suit ended up being in vain because King later called off the deal with Mylan.

At the time of the trades, Perry disclosed that it owned 10 percent of Mylan and briefly described a hedging technique that it had employed, but it did not fully explain the intricacies of the technique or its entire stock position.

In a statement on Tuesday, the firm said: "As we have previously advised our investors, the staff of the Securities and Exchange Commission has been conducting an informal inquiry in connection with Perry Capital's trading in the securities of Mylan Labs.

The original article appears here.

-- MDT