Are brokers dangling by a thread?

Thu May 1, 2003



A new NASD ruling may leave capital introduction services in peril

Is there a 'smoking gun email' trail proving that prime brokers have been selling hedge funds through their 'capital introduction' services? Some people fear that there may be and that prime brokers could find themselves under serious regulatory scrutiny.

What is catching the attention of attorneys at many of the investment banks is not so much the comments of SEC chairman, William Donaldson, in which he said that he would take a long hard look at capital introduction. Rather it is a little noticed ruling by the NASD.

The hand grenade that the NASD rolled into the boardrooms of the banks came in the form of a seemingly innocuous notice to members, which gently reminded them of sales practice when selling hedge funds and registered hedge fund products.

The notice referred to the sale of hedge fund products to retail...

ISSN: 2151-1845 / CDC10004H

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