So-called "hedge fund hotels"--the blocks of office space leased out by investment banks to hedge funds and independent traders in hope the funds will become banking clients--are under investigation by the Massachusetts secretary of state, reports The New York Times' Jenny Anderson. Investigators are concerned that the leases could create conflicts of interest and have subpoenaed UBS about the practice.
William F. Galvin, the Massachusetts secretary of state, has subpoenaed UBS and is examining other banks with hedge fund hotels in Boston to determine how they are charging for their services. He is looking at whether hedge funds are paying higher than normal trading fees to banks to compensate them for the office space and failing to disclose this expense to investors.
Banks’ Leases to Hedge Funds Are Questioned [New York Times]