Bear's Big Loss Arouses SEC Interest

The SEC is inquiring into the near-collapse of its fund, and Bear Stearns CEO James Cayne's reputation may be on the line

Bear Stearns (BSC) may have a lot of explaining to do about a big restatement of losses at one of its troubled hedge funds—and not just to its investors. BusinessWeek has learned that the Securities & Exchange Commission recently opened a preliminary inquiry into the near-collapse of Bear Stearns' High-Grade Structured Credit Strategies Enhanced Leveraged Fund. People familiar with the inquiry say regulators are interested in learning how the Wall Street investment firm came to dramatically restate the April losses for the 10-month-old fund, which invested heavily in securities backed by subprime mortgages, or home loans to consumers with shaky credit histories.

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