Owing to an indemnity letter it provided to its U.S. broker, A.G. Edwards, London-based hedge fund manager Headstart Asset Management reportedly may have to pay up for losses caused to U.S. mutual fund shareholders resulting from nearly $2 billion of market-timing trades.

William Galvin, secretary of the Commonwealth of Massachusetts, asked A.G. Edwards earlier this month to compensate shareholders for market-timing trades but didn't name the two hedge funds that the brokerage allowed to time the funds. Now, Galvin alleges that Headstart made roughly 29,000 such trades through A.G. Edwards over two years beginning December 2001. But because Headstart agreed to cover any potential claims arising from such trading activities, A.G. Edwards may go scot-free while Headstart foots the bill.

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