Secretary of State William F. Galvin said on Wednesday, his current
investigation of the ties between UBS AG and certain hedge funds
stems from broader concerns about the practices of a lightly
regulated corner of the financial services industry. "The
bigger issue," Galvin said, "is what is to be the role
of hedge funds in the financial system? Hedge funds are like
the jet stream that affects all the other weather, and can have
a disruptive effect at a time when we're saying to most investors
. . . 'you're on your own.' "
Revising earlier reports, Galvin said he
has not issued subpoenas to UBS, but rather that bank officials
have agreed to furnish testimony about the firm's relationship
with hedge fund traders who operate out of UBS's Boston office.
Galvin is trying to establish whether the hedge funds are
paying for the office space through higher-than-normal trading
fees to UBS, but aren't informing the investors of these