J.P. Morgan Chase and Lehman Brothers Holdings were charged this week in a class-action lawsuit for helping Canary Capital Partners, a New York-based hedge fund, engage in trading violations that harmed long-term shareholders, The Wall Street Journal reports.
Until the lawsuit, both J.P. Morgan and Lehman had managed to stay above the far-reaching mutual fund scandal that has tainted more than a dozen financial service firms with accusations of improper trading activities. The lawsuit was filed in federal court in Baltimore.
The lawsuit combines hundreds of complaints filed after New York Attorney General Eliot Spitzer first revealed that Canary received permission from dozens of mutual funds to engage in improper rapid-fire trading that reportedly stripped profits form long-term investors.
A previous complaint against Pilgrim Baxter & Associates, which owns the PBHG Funds, maintains that Canary received loans possibly totaling $105 million from J.P. Morgan Securities that financed improper trades in PBHG funds.
Lehman was charged in a separate lawsuit accusing Federated Investors of turning a blind eye toward improper trades in its proprietary funds. The trades in question, the lawsuit contends, were directed by a Lehman employee. Regulators have not charged Federated with improper trading but the firm has acknowledged the questionable trades.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.