Misconduct fine for Deutsche Bank

April 11, 2006
BBC News

The FSA seeks to maintain confidence in financial markets. The Financial Services Authority (FSA) has fined Deutsche Bank £6.3m (9.2m euros; $11.1m) for misconduct in its handling of share trades in two firms. The FSA found the bank breached acceptable standards of market conduct in two share transactions handled by a London-based unit in 2004. The fine is the third largest imposed on a firm for market misconduct by the regulator since 2001. Deutsche Bank said it had tightened up its procedures in response.

...The FSA found the bank had made errors in the purchase of shares in Swedish firm Scania in 2004, fining it £5.8m. It was also fined £500,000 for failing to ensure proper procedures were followed in the sale of shares in Swiss firm Cytos.

Deutsche's buying of Scania stock on the open market, at a time when it was handling the sale of a block of Scania shares bought from Volvo, was not sufficiently transparent. This, the FSA said, resulted in potential investors not having a "full understanding" about the market for Scania shares. The FSA also found that relevant information was not shared with senior management or internal compliance units while some details released to investors were "incomplete or inaccurate".

David Maslen, who headed the Deutsche department handling the sale process, has separately been fined £350,000 for his behaviour. The FSA said that, in his position, Mr Maslen should have been aware of the rules governing market conduct but found no evidence of deliberate wrongdoing on his part...

Labels: Financial Services Authority

"The thing about global macro is you have to be a very good trader," said Gavin Rankin, head of investment analysis in Europe at Citigroup Private Bank. "Identifying the trend, timing of trades and risk management are crucial."

Analysts estimate that global macro managers, which control less than 10 percent of the more than $1 trillion (570 billion pounds) estimated to be invested in hedge funds, will generally get around 50 percent of trends right and about 50 percent wrong.

"Global macro is probably one of the most difficult strategies to execute," said Nicolas Campiche, head of manager selection services at Pictet et Cie. "It's very difficult to identify good new global macro managers."

Law firm denies allegation of e-mail system break-in

Bermuda Royal Gazette
by JONATHAN KENT
April 07. 2006

A CLAIM has been made in court evidence that an international detective agency broke into the e-mail system of Wakefield Quin – but the local law firm has categorically denied that there is any evidence of that. The allegation surfaced in a secretly-filmed video tape that was admitted into evidence in a civil case related to the IPOC International Growth Fund.

A senior counsel of Wakefield Quin referred us to Alan Dunch, the lawyer acting for the firm in connection with the IPOC litigation and investigation. "Having been made aware of the allegation that Wakefield Quin's computer network had been breached, a full investigation was undertaken," Mr. Dunch said yesterday. "No evidence whatsoever was unearthed that would in any way substantiate the allegation." He declined to comment further.

The allegation was made by Jeffrey Galmond, the Danish lawyer who runs the Bermuda-based IPOC Fund, in the course of a conversation with a former business associate, James Hatt. "You know Kroll broke into the e-mail system of Wakefield Quin," Mr. Galmond told Mr. Hatt. "They are very good, I must hand it to them, they are very good, right?"

The conversation took place at the Ritz Hotel in London on September 6, 2004, and Mr. Hatt filmed it without the knowledge of Mr. Galmond. We contacted the global headquarters of Kroll in New York, but they offered no comment for our story. However, an industry source suggested that the company had not broken into Wakefield Quin's e-mails...

Labels: Kroll

Labels: Howard Vogel, Melvyn Weiss, Milberg Weiss

SEC charges two with stock fraud

By Robert Schroeder
MarketWatch
April 6, 2006

WASHINGTON (MarketWatch) -- The Securities and Exchange Commission charged two New York men with securities fraud and froze their assets Thursday, alleging the individuals used the Internet to manipulate the market for 24 microcap stocks.

The defendants, Faisal Zafar and Sameer Thawani, in some cases linked their fraud to concerns about terrorism and health epidemics, the SEC said. In one case, Zafar said an issuer was getting a contract from the Department of Homeland Security, just after the London subway bombings. He said another issuer was acquiring a company that produces "bird flu" vaccine, the SEC said.

The agency said the two men created at least 300 different Internet user IDs and used them to post more than 1,000 messages about the stocks. The SEC is seeking penalties and repayment of $873,000 in ill-gotten gains. Robert Schroeder is a reporter for MarketWatch in Washington.

Labels: Refco

Labels: Refco

Vioxx Maker Faces Punitive Damage Hearing Today Following Split Ruling

Insurance Journal
April 6, 2006

A jury in Atlantic County Superior Court in Atlantic City, N.J. ordered pharmaceutical giant Merck to pay a 77-year old user of its Vioxx drug at least $4.5 million in compensation after finding that the drug helped cause the heart attack suffered by retired insurance agent John McDarby.

At the same time, the jury rejected a similar claim by a second plaintiff. It found that the drug was not a significant cause of a heart attack suffered by 60-year old Thomas Cona and awarded no damages in that case.

Merck failed to warn both plaintiffs about the risks of taking its painkiller Vioxx, the jury determined, but the panel concluded the drug was only a factor in McDarby's heart attack and only he should receive compensatory damages.

There will be a separate hearing today on whether Merck should be required to also pay punitive damages. New Jersey law caps punitive damages to no more than five times compensatory damages...

Hedge fund activism seen rising

April 6, 2006
Reuters

Powerful hedge fund investors will increasingly seek a bigger say in the running of companies they invest in, says Sid Shamnath, an investment manager for Titanium Capital. Shamnath, a manager of Titanium's Global Event Driven Arbitrage Fund, said on Wednesday some of the large hedge funds had less freedom than their smaller rivals to take and exit positions and so needed to take a longer term view of their investments, prompting greater interest in company strategy.

"Large funds, like those managing something like 4 billion dollars, need to take a longer-term view ... and need longer lock-up periods for investors," Shamnath said at the Reuters Hedge Funds and Private Equity Summit in London...

...Some relationships between companies and hedge funds have already turned sour. The Children's Investment Fund, for example, helped orchestrate the removal of Deutsche Boerse's chairman Rolf Breuer and chief executive Werner Seifert to register their disapproval of the Frankfurt bourse operator's attempt to buy the London Stock Exchange.

Brian Magnus, co-head of UK Investment Banking at Morgan Stanley, said shareholder activism was a "weathervane of the state and maturity of capital markets". "Shareholder activism had been confined to the UK alone until not very long ago. Now we're seeing it across Europe, in Germany, even Italy," Magnus told the Reuters Summit.

Labels: Morgan Stanley

Kroll's on the case - Famed private eye may help find missing hedge fund millions

By James Paton
Rocky Mountain News
March 24, 2006

...Kroll Inc., whose sleuths could receive up to $450 an hour, has been asked to search for the assets of International Management Associates, an Atlanta firm, according to court documents filed Thursday. An agreement to hire the high-profile investigator awaits court approval.

Federal regulators have accused the company and its founder and Chief Executive Kirk Wright of hiding "massive" losses from investors after reeling in as much as $185 million from hundreds of people, including a few one-time Broncos, prominent doctors and others.

Nearly all of the cash has vanished, according to the lawsuit filed by the Securities and Exchange Commission. The allegations came on the heels of a complaint leveled by former Broncos Steve Atwater, Terrell Davis and Ray Crockett, and current wide receiver Rod Smith.

They sued after the hedge fund firm refused to return their money and claimed that Wright had made a big bet short-selling stock of Time Warner even though he had promised not to take on that kind of risk. Efforts to reach the players have been unsuccessful.

International Management told investors that its Taurus Fund rose 20 percent last year, while in reality the assets of the fund and other products "had been largely dissipated" by 2005, the SEC said...

...Wright, the Harvard-educated head of International Management, took money from the hedge funds and made more than $6 million in investments in several real estate ventures and bought a Jaguar, a Bentley, an Aston Martin and other cars, in addition to $600,000 in art and jewelry, SEC papers show...

...Kroll, founded by Jules Kroll and based in New York, declined to comment on the hedge fund case.

Labels: Kirk Wright, Kroll

SEC charges Global Crown with falsifying hedge fund returns

By Carolyn Pritchard
Match 30, 2006
Marketwatch

The Securities and Exchange Commission on Thursday charged the managers of securities broker and investment adviser Global Crown Capital LLC with fraudulently concealing from investors the trading losses of hedge fund Cogent Capital Management. The agency alleges that the principals of Global Crown sent misleading account statements to investors in the San Francisco-based hedge fund that falsely inflated the fund's performance. A hearing on the matter will be scheduled before an administrative law judge to determine whether remedial actions are appropriate, the SEC said.

Screening missed teacher's drug case - Case of a Hoosier's Florida arrest record exposes limitations of background checks

By Staci Hupp
April 2, 2006
Indianapolis Star

"It's scary that someone could be prosecuted in another state and come to Indiana and we don't know about it," said Rep. Robert W. Behning, R-Indianapolis, who heads the House Education Committee.

At least 41 other states have switched to FBI screenings that use fingerprints to scan criminal records nationwide. Teachers who apply for licenses in Indiana are subject only to the state's limited criminal history check, a computer screening that relies on incomplete records from county courthouses.

Money typically is the sticking point, according to Indiana State Police officials who have pushed for changes. Schools would have to pay up to $39 for FBI background checks, while the state system is available for free.

No one knows how many offenders have slipped through screening in Indiana. A check of newspaper stories from the past decade shows that at least three school employees convicted of violent crimes passed background checks.

Indiana bars those convicted of drug dealing, crimes involving children and some other felonies from teaching.

But first it has to spot them...

Labels: background checks, database

SEC has failed to fix security gaps, GAO says

April 3, 2006
Government Computer News
By Mary Mosquera, GCN Staff

Information security weaknesses persist at the Securities Exchange Commission because the agency has not followed through on recommendations the Government Accountability Office made last year for comprehensive, agencywide information security. SEC has implemented just a few of its recommendations, GAO said in a report...

...SEC’s information security weaknesses remain in large part because the agency has not put in place and documented key elements of a comprehensive information security program to ensure that effective controls are established, the report said. “Until SEC implements such a program, its facilities and computing resources and the information that is processed, stored and transmitted on its systems will remain vulnerable,” said Gregory Wilshusen, director of GAO’s information security issues, said in the report released Friday...

...“The remaining four major applications are on track to be accredited during the spring,” said SEC chairman Christopher Cox in a written response. By October, SEC plans to fix weaknesses that GAO highlighted, including directing the SEC CIO to fully implement an agencywide information security program, assessing systems risk, beginning testing and evaluation program for security controls and tracking remedial action to reduce risk, Cox said.

Labels: GAO

Brit women keeping a private eye on their groom’s credentials:

New Kerala
April 3, 2006

Wealthy professional women have become increasingly apprehensive of the financial consequences of divorce and are making greater efforts to find out their financial status before tying the knot.

The Independent in a report said that though the main purpose of such surveillance was to check the financial credentials of the suitors, women sometimes also mounted observation to check the men’s antecedents and behaviour on a night out...