U.S. Securities and Exchange Commission
Litigation Release No. 17841 / November 15, 2002
SEC v. Beacon Hill Asset Management LLC, Beacon Hill Master, Ltd., Bristol Fund, Ltd., Safe Harbor Fund L.P., Safe Harbor Asset Management, LLC, Milestone Plus Partners L.P. and Milestone Global Advisors, L.P., Civil Action No. 02 CV 8855 (LAK) (S.D.N.Y.)
Court Enters Preliminary Injunction and Other Relief Against Beacon Hill Asset Mananegement, LLC.
The Securities and Exchange Commission announced that, on November 13, 2002, Judge Lewis A. Kaplan of the Southern District of New York, issued a Stipulation and Order granting the Commission's motion for a preliminary injunction against Beacon Hill Asset Management LLC (Beacon Hill) and other relief. Beacon Hill and the other parties consented to the court's order.
The Commission's Complaint, filed on November 7, 2002 alleges that Beacon Hill, located in Summit, New Jersey, managed three "feeder" hedge funds Bristol Fund, Ltd., Safe Harbor Fund L.P., and Milestone Plus Partners L.P. as well as a "master" fund, Beacon Hill Master, Ltd., through which the feeder funds conducted trading. The funds principally invested in the mortgage-backed securities markets on a leveraged basis. The Complaint alleges that, for at least the periods ending July 31, August 31, and September 30, 2002, Beacon Hill reported net asset values and corresponding returns to fund investors that it knew or should have known were materially overstated. Among other things, on October 8, Beacon Hill reported to investors that the Safe Harbor and Bristol funds had suffered losses estimated at 25% during the month of September. On October 17, however, Beacon Hill reported to investors that losses were approximately 54% more than double the amount reported on October 8 including losses that had not been reported during prior periods. The Commission's Complaint alleges that Beacon Hill violated Section 206(2) of the Investment Advisers Act of 1940, which prohibits transactions, practices, and courses of business which operate as a fraud or deceit upon investment advisory clients and prospective clients. The Complaint names the hedge funds and their controlling entities as "relief" defendants.
In addition to granting a preliminary injunction against Beacon Hill, the court's order requires that:
- Beacon Hill and the hedge funds report to the court within 10 days that Beacon Hill is no longer managing the funds and that a new investment manager is in place;
- No redemptions, withdrawals, distributions, or extraordinary payments be made from the funds without court approval;
- The funds cause the new investment manager to file periodic reports with the court, the SEC, and investors; and
- Beacon Hill preserve all relevant documents and cooperate fully to enable the new investment manager to perform its duties.
The Commission's investigation is continuing. For further information see Litigation Release number 17831 (November 7, 2002).