NASD Steps Up Fight against Hedge Fund Fraud

Financial News, August 22, 2003 | Go to article overview

NASD Steps Up Fight against Hedge Fund Fraud


Byline: Anuj Gangahar

The National Association of Securities Dealers, the US watchdog, has stepped up its fight for better corporate governance and disclosure at hedge funds by filing enforcement actions against three firms.The three separate actions are the latest cases in NASD's continuing focus on the sale and marketing of hedge funds and private investment partnerships.

Mary Schapiro, vice-chairman at the NASD, said: "As hedge funds are increasingly marketed to retail investors, the need to disclose all of the risks and material facts becomes paramount. Brokers cannot mislead investors by failing to disclose material facts when selling these or any securities."

The actions have been taken against three US-based alternative investment firms. Win Capital Corporation and Shelman Securities have been charged with securities fraud, while the NASD has settled with Neil Brookes, an adviser formerly associated with Allstate Financial Services.

The NASD claims that Win Capital, Steven Bayern, the firm's chairman, and Patrick Kolenik, its president, failed to disclose material facts to investors relating to the use of $700,000 ([euro]641,180) of a sum of $1m raised by the firm.

It says that Bayern and Kolenik failed to admit that in September 2002, they used $300,000 of the $1m to buy a note from Cyndel & Co, a firm they jointly controlled. …

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