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13 Feb 2007

SEC slammed over hedge fund 'wealth' test

Everyone, from politicians to the press, both here and abroad, has been shrieking in increasing apocalyptic terms about the myriad dangers that big, bad hedge funds pose to poor, small investors. Why not protect those poor, small non-accredited and presumably unnatural people from themselves? Heh, here are some answers from those "unnatural people"

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F&C To Launch Global Hedge Fund

F&C Asset Management announced on Monday that they are launching a global diversified fixed income hedge fund, called the F&C Tourmaline fund.

The hedge fund is to be run by a team of three, Sanjay Joshi, Rabbani Wahhab and Mario Nicolaou, and quantitative analyst Shilen Shah. They hired the team of fixed income hedge fund managers from London & Capital.

Last month F&C had announced their interest in expanding their hedge fund presence, saying they had plans to increase their investments in hedge funds.

"This is an important development for F&C Alternative Investments and a mark of F&C's ambition to grow our hedge fund presence. We will continue to actively look for further opportunities," Fernando Ribeiro, head of investments, said in a note.

At the end of last month shares in F&C fell heavily after the firm said it would rebase its 2007 dividend to allow increased investment in higher-margin new products.

F&C Management Ltd is a European investment house quoted on the London Stock Exchange with €154.6 billion (over $200 billion) under management and offices throughout Europe.

Hedge Fund Head Ordered to Pay Back $20 Million

The SEC released the details of the fines U.S. District Court Judge Charles Pannell ordered against hedge fund manager Kirk Wright yesterday. Pannell ordered nearly $20 million in fines and penalties for defrauding investors through his hedge fund, International Management Associates LLC.

The judge entered a default judgment against Wright ordering the repayment of $17 million, interest of $2.7 million and an imposed a civil penalty of $120,000, the SEC said in the statement.

Wright's hedge fund came under scrutiny eventually for it's unusually consistent high returns, vague descriptions of investment strategies, aggressive marketing, no auditing, and secretive behavior by the manager.

From 1997 through early 2006, Wright raised as much as $185 million from 500 investors through a "fraudulent scheme" involving seven hedge funds that he managed through IMA, the SEC said in a lawsuit filed a year ago.

Wright was also spending too much for his funds, it was noted, a lavish wedding reception, the $55,000 engagement ring his bride wore, the entertainment suites at Atlanta Falcon football games, Atlanta Hawk basketball games, concerts, a Bentley, a Jaguar, an Aston Martin, a BMW, and a Lamborghini, and as proof of his investment returns, only photocopied spreadsheets.The firm also sent out quarterly statements misrepresenting the amount of money in those funds and their performance.

Wright was arrested in May on mail-fraud charges, He's in an Atlanta detention center awaiting a criminal trial related to the 21 counts of mail fraud and three counts of securities fraud, each carrying a maximum sentence of 20 years behind bars.

Original story; Fake Hedge Funds Cost Investors Millions