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MSN Money UK - Bernard L. Madoff Investment Securities LLC was examined at least eight times in 16 years by the U.S. Securities and Exchange Commission (SEC) and other regulators, who often came armed with suspicions, the Wall Street Journal said.
SEC officials followed up on emails from a New York hedge fund that described Bernard Madoff’s business practices as "highly unusual," the paper said.
The Financial Industry Regulatory Authority, the industry-run watchdog for brokerage firms, reported in 2007 that parts of the firm appeared to have no customers, according to the paper.
Madoff was interviewed at least twice by the SEC, the paper said, adding that regulators never came close to uncovering the alleged $50 billion Ponzi scheme that investigators now believe began in the 1970s.
Washington Post - New evidence has emerged in an insider-trading investigation that the Securities and Exchange Commission closed two years ago without filing charges, raising questions on Capitol Hill about the government’s oversight of what was once one of the nation’s most prominent hedge funds.
According to documents, the hedge fund — Pequot Capital Management — secretly began to pay $2.1 million to a key witness in the case last spring, just three months after several senators called on the SEC to reopen its investigation.
Top Republicans on the Senate Finance and Judiciary committees asked Pequot’s chairman this week to provide records related to the payments. The FBI is also looking into the matter, according to people familiar with the case.
New York (HedgeCo.Net) - Those who push for greater transparency of the hedge fund industry had a victory this week, when an EU official all but declared that funds in the European Union will be regulated.
Charlie McCreevy, the bloc’s internal market commissioner, launched a public discussion on whether or not hedge funds need stricter oversight. Though McCreevy has said in the past that no greater oversight is needed for hedge funds, the majority of those present disagreed.
“We don’t need more consultation. We need regulation. We know exactly what are the problems,” said ex-Prime Minister of Denmark Poul Nyrup Rasmussen, who shares the view that short-selling by hedge funds have had a hand in prompting turmoil in the market.
The results of the consultation, which is still underway, are expected to be known in early 2009. Though most hedge funds fall outside the EU, London is home to several large hedge funds and many portfolio managers.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Reuters - Hedge funds in the European Union will be regulated following a public consultation that is currently underway, a senior EU official said on Wednesday.
"On hedge funds, we have used as our basis that they must be regulated," EU Economic and Monetary Affairs Commissioner, Joaquin Almunia told the European Parliament.
On Monday the bloc’s internal market commissioner, Charlie McCreevy, launched a public consultation on whether hedge funds needed more oversight but stopped short of saying if there will be regulation or a softer approach, such as an industry code.
Washington Post - The European Union will this week take the first step toward new rules governing high-risk hedge funds, the EU’s financial services chief said Monday.
EU Commissioner Charlie McCreevy, long opposed to regulating the funds, is bowing to calls from the G-20 group of the world’s leading industrialized and emerging economies and many European politicians for more oversight for hedge funds that invest large sums and often operate in near secrecy.
He said the European Commission would consult European financial firms and others, sparking a debate that might see regulators eventually come up new rules.
He said he wanted to focus on the risks hedge funds might pose to the financial system if current rules were left in place. EU regulators also have to define hedge funds and consider how they should deal with hedge funds based in jurisdictions with little supervision, he said.
The Money Times - A U.S. House committee Thursday reviewed hedge funds, which the panel’s chair called "virtually unregulated."
Because they aren’t required to report on their holdings, leverage or strategies, "hedge funds are virtually unregulated," said Rep. Henry Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform. "Regulators aren’t even certain how many hedge funds exist or how much money they control."
That segment of the financial industry is "growing rapidly," Waxman said, adding he was concerned that hedge funds, as other financial sectors, could collapse.
Bloomberg - Hedge-fund managers including George Soros and Philip Falcone, in an unprecedented appearance before Congress, defended their practices and profits while splitting over whether the U.S. should impose stricter regulations.
"This is not a case where management takes huge bonuses or stock options while the company is failing,” said Falcone, one of five billionaire investors who testified today before the House Committee on Oversight and Government Reform in Washington.
Falcone, senior managing director of New York-based Harbinger Capital Partners, urged Congress to require more disclosure by hedge funds, which oversee $1.7 trillion of investments. Soros, founder of Soros Fund Management LLC, cautioned against “ill-considered” rules because this industry is reeling from market losses and client defections.
International Herald Tribune - Hedge fund managers usually shun the spotlight. But five of them, billionaires all, are about to come under the glare on Capitol Hill.
The money managers — Philip Falcone, Kenneth Griffin, John Paulson, James Simons and George Soros — have been called by a House panel to discuss some of their trade secrets at a hearing on Thursday.
The topics are likely to range from the managers’ use of leverage — the borrowed money that fuels investment returns on the way up but can be devastating on the way down; their funds’ bets in the markets; and the managers’ pay.
Also front and center will be the matter of oversight, one of the most contentious issues confronting the loosely regulated hedge fund industry. Regulation, or the lack of it, has been an issue since the 1990s, but it has come to the fore this year as questions have swirled about hedge funds’ role in the financial crisis.
Boston Globe - TODAY American International Group releases third-quarter results. The insurance giant is expected to post a loss of 90 cents a share, compared with a $1.35-a-share profit last year.
Starbucks Corp. releases fourth-quarter financial results and is expected to earn 13 cents a share, down from 31 cents last year.
TOMORROW TJX Cos. reports third-quarter results. Last year, the Framingham retailer posted net income of 54 cents a share.
WEDNESDAY The House Financial Services Committee holds a hearing on mortgages.
Macy’s Inc. is expected to report a third-quarter loss of 19 cents a share, compared with year-ago net income of 10 cents a share.
THURSDAY The House Oversight and Government Reform Committee holds a hearing on regulation of hedge funds.
Bloomberg - Some hedge fund managers provided inaccurate information to investors in newsletters and monthly fact sheets, Hong Kong’s Securities and Futures Commission said.
In one instance, the hedge fund manager excluded the fund’s largest stock holding from its top five investments because of “oversight,” the regulator said in a statement issued late yesterday to all licensed hedge fund companies in the city. In other cases, the managers misstated the funds’ debt ratios and net asset values “to a limited extent.”
The findings were results of a recent SFC inspection of eight small locally established hedge fund managers overseeing $5 million to $800 million and employing three to 30 people. The regulator didn’t identify the managers involved. Ernest Kong, a SFC spokesman, declined to provide further comments.
Regulators worldwide have been increasing oversight over the $1.7 trillion hedge fund industry amid a crisis that has laden the world’s largest banks and securities firms with more than $670 billion of losses and led to the failure of Lehman Brothers Holdings Inc. Hedge funds are bracing for the industry’s worst year in almost 20 years and trying to stem investor withdrawals.
Reuters- The group in charge of setting Libor interest rates said on Friday it will strengthen oversight of the global interbank lending benchmark, months after it became seriously distorted by the credit crisis.
The British Bankers Association said on its website that details will be published in "due course," adding it had made no changes to the list of banks that contribute to its rate-setting process for London interbank offered rates, known as Libor.