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West Palm Beach (HedgeCo.net)- A preliminary injunction has ordered two officers of activist hedge fund Costa Brava Partnership III LP of Boston to cease and desist, refraining from all contact with former, current and future auditors of Telos Corporation.

Costa Brava officers, Andrew R. Siegel and Seth W. Hamot, who sit on Telos’ board of directors, were accused of making repeated threats of litigation against the company’s last two independent auditors. Both auditors resigned their engagements with Telos as a result of the conduct of Hamot and Siegel even though neither auditor had found fault with Telos on any accounting issues.

The actions were seen by Telos as tactics to break up the company on order to secure redemption of their public preferred stock.

In his order, Judge Matricciani also wrote that "Telos is likely to demonstrate that their (Hamot and Siegel) conduct was not just wrongful, but unlawful." The judge stated that the communications of Hamot and Siegel with Reznick may have violated Sarbanes-Oxley section 303 and SEC Rule 13b2-2, "providing another basis for liability for tortious interference with business or economic relations."

Attorneys for Hamot and Siegel have said they will file an appeal of the preliminary injunction with the Court of Special Appeals of Maryland.

Alex Akesson

alex@hedgeco.net

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Tags: boston, brokerages, due-diligence-service, february-12, internal-investigation, prison-term, publication-format, telos-corp, volatility

Washington, D.C., Jan. 3, 2008 – The Securities and Exchange Commission has received and posted on its Web site the text of the RAND Corporation’s final report on practices in the investment adviser and broker-dealer industries. The Commission has been anxious to receive RAND’s study of the investment adviser and broker-dealer industries, and the nature of their relationships with customers. The report will assist the Commission’s efforts to update our regulations to improve investor protections in today’s new marketplace," said SEC Chairman Christopher Cox. Our staff is now studying the report and the potential regulatory implications of its findings. RAND produced the report under contract with the Securities and Exchange Commission (http://www.sec.gov/news/press/2006/2006-162.htm). The report is the product of more than a year of empirical study and analysis. Following a March 2007 Court of Appeals decision that overturned a 2005 SEC rule permitting non-adviser broker-dealers to charge fees to investors based on account size, the SEC and RAND agreed that RAND would deliver its final, peer-reviewed report in pre-publication format on Dec. 31, 2007, three months earlier than the contract had originally required. The text of the posted report is final and has been peer-reviewed. Neither the data nor the analysis on which it is based will change.

Tags: appeals-decision, broker-dealer, broker-dealers, chairman-christopher-cox, christopher-cox, court-of-appeals, empirical-study, investment-adviser, investor-protections, new-marketplace, news-press, publication-format, publication-version, rand-corporation, regulatory-implications, sec-chairman, sec-rule, securities-and-exchange, securities-and-exchange-commission