Here on the blog we have been folllowing the implosion of the two Bear Stearns Hedge Funds. It is front page and center on the latest B/W magazine cover. Here are issues to consider in reading this article.
Hedge funds are NOT regulated under the Investment Company Acts of 1933 and1934 which cover mutual funds yet they are accounting for one third of daily trading volume, is this a good idea?
These lawsuits suggests that either the manager or the investors or both did not know what they were doing, is this transparency? My math teacher in high school used to say that two heads are better than one, unless of course, it represents a pooling of ignorance, gee I guess that finally happened in this situation.
Jeff Skilling the former CFO of Enron sits in jail doing 25 years in the FED Pen. He is appealing his conviction. Yet both the Bear Hedge Funds and Enron resulted in the same thing for investors, everyone lost all their money. If Skilling had called Enron a Hedge Fund would he be a free man today, or conversely should the managers of the Bear funds be wearing the same orange coveralls as Jeff today?
What stance should accountants take on their responsibility in reporting to shareholders on such investments? Are existing statements adequate for disclosure? See our next post and read the Global Audit Report on Reserve all semester which not one person has bothered to read yet……
Professor Elam 
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