Meanwhile, Massachusetts' top securities regulator filed a complaint Wednesday accusing Bear Stearns of improper trading in two in-house hedge funds that later collapsed because of wrong-way bets on risky mortgage holdings.
The administrative complaint was filed by the state's Secretary of the Commonwealth, William Galvin. A copy was posted on his office's Web site.
According to the complaint, Bear had conflicts of interest involving its various affiliated entities that led to improper trading at the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Enhanced Leverage Fund.
While Bear assured investors at one of the funds that proper disclosures were required when trading occurred between related parties, these controls "did not survive the daily ordeals of trading and managing and leveraging," the complaint contends.
The complaint said that "the result of this poor conflict management was that hundreds of transactions did not obtain the approvals required by federal law and promised in the offering documents."
Bear said in mid-July that the two hedge funds had very little value left. They both had invested in collateralized debt obligations -- bonds made up of repackaged mortgages -- which collapsed as homeowner defaults surged.
A Bear Stearns representative was not immediately available for comment.