“The Commission’s ability to inspect books and records is a critical regulatory tool that allows us access to a registrant’s daily operations. When a CPO or CTA denies us that right of access, we must act swiftly to protect investors and important documents,” argued Gregory Mocek, the CFTC’s Director of Enforcement.
LAM, incorporated in Bermuda but with a Chicago office, is registered as a Commodity Pool Operator (CPO) and Commodity Trading Advisor (CTA). The CFTC’s initial complaint alleges that LAM’s Director, Laurence Rosenberg, a former chairman of the Chicago Mercantile Exchange, told the National Futures Association (NFA) that none of LAM’s business is conducted in Bermuda, and that all telephone calls to the Bermuda office are forwarded to an office in Toronto, Canada, where all trading is done and all books and records are maintained. However, according to the CFTC, the Toronto address is only a mail drop, not a business address.
The complaint further alleges that that LAM managed substantially less than claimed by Rosenberg. According to Rosenberg, LAM managed approximately 250 accounts and operated several commodity pools, with total assets of approximately $1 billion. Rosenberg initially provided the NFA with access to LAM’s protected web pages, but then blocked access after receiving advice from its lawyers that revealing the information could breach secrecy laws in Switzerland, where many clients are based. The NFA managed to find $466,710,761 in assets for all commodity pools and managed accounts, but the CFTC says that LAM has neither allowed CFTC staff to inspect and copy its books and records, nor has it produced the requested documents to the CFTC, as mandated by the court’s order. Because LAM is a registered commodity trading advisor (CTA) and commodity pool operator (CPO), the CFTC argues that it is entitled to inspect all of LAM’s books and records, not simply selected documents.
“LAM continues to hide behind unspecified Swiss “bank secrecy” laws and has only produced minimal and selective documents to CFTC staff,” the Commission stated.
According to the Financial Times, LAM said last week that it has only one US client who has invested US$1 million into the fund, and that it would not reveal any details about its other clients.
The complaint also alleges that LAM’s principals, including Rosenberg, have made several inconsistent statements concerning assets in the pools and managed accounts, LAM’s ownership, US investors in the pools, and the location of its books and records. The FT reported that LAM admitted giving inaccurate statements, but that this was a mistake.
The matter is set for a status hearing on July 11, 2007.
by Glen Shapiro, LawAndTax-News.com, New York 10 July 2007
Filed under: IPO
Not wishing to talk ourselves out of business here, but the question, perhaps, should be ‘Do you really want to be involved in the first place?’. We are not making any judgement on any specific deal here, but investors should look at all the factors first.
1. Modus Operandi
For years we have seen big private equity firms buy public companies out and take them private, clean them up and then sell them on for profit. Seems like a simple plan akin to buying a house and doing it up, only bigger. However a number of these firms talk about the stock market like it does not reflect value and has harmed companies, we are then expected to believe that the floatation of the very same companies saying this is sensible?
2. Top of the market.
There is no doubt in my mind that some of the people running these firms are very clever and very smooth operators who have made vast amounts of money, billions in some cases, buy low and selling high. Now that they are effectively selling their companies to the market, have they decided that this is the perfect time to sell. I.e have we seen the top?
3. Motivation
Some of the founders of the businesses that we are seeing getting listed are going to make billions of dollars. They have done this buy being involved in their business and building them up over years. These are not the kind of businesses that you can just put in a CEO and hope that all will be well. They are not selling biscuits, cigarettes or Oreos here. These business are built around deal makers who can spot and opportunity, who thrive on the deal, more importantly these are the guys that give enough confidence to lenders to invest the huge sums of money that are required to do these deals. Will these guys still be there when there are shareholders meetings, SEC enquiries and all the daily drudgery of being a listed business?
4. Regulatory issue
We have already seen the private equity guys brought before senate committees and parliamentary hearings being questioned on their businesses. They have brought up tax issues, economic concerns, labour problems etc etc. As these business continue to do deals will we see a backlash like in the junk bond markets of the 1980’s when investment bankers were put in prison and the industry effectively neutered?
5. Deal Flow
How many more multi billion dollar deals can be done? If you were a CEO of a company now, seeing your competitors being taken over and other CEO’s being ‘rationalised’ wouldn’t you be doing all you could to bring in outside consultants to look at your business and make suggestions on what a private equity firm would do if they took you over?
6. Structure
Remember also, that you would not be buying the deals that the firm are involved in, you would be buying the share of the management company and the profit flow from that. There is a difference.
The lists above is by no means exhaustive and we haven’t put any of the positives, of which there are many, but it is important to think about whether or not you want to get involved rather than whether you can or not.
