The SEC is inquiring into the near-collapse of its fund, and Bear Stearns CEO James Cayne's reputation may be on the lineBear Stearns (BSC) may have a lot of explaining to do about a big restatement of losses at one of its troubled hedge funds—and not just to its investors. BusinessWeek has learned that the Securities & Exchange Commission recently opened a preliminary inquiry into the near-collapse of Bear Stearns' High-Grade Structured Credit Strategies Enhanced Leveraged Fund. People familiar with the inquiry say regulators are interested in learning how the Wall Street investment firm came to dramatically restate the April losses for the 10-month-old fund, which invested heavily in securities backed by subprime mortgages, or home loans to consumers with shaky credit histories.
As BusinessWeek first reported, Bear Stearns told investors May 15 that the Enhanced Leveraged fund—which raised $642 million last summer—had lost 6.5% in April. But three weeks after that estimate, the investment firm shocked investors on June 7, telling them that the fund's actual April loss was 18.97%, or 23% for the year (see BusinessWeek.com, 6/12/07, "Bear Stearns' Subprime Bath").
SEC Commences Probe
Read More
