SEC OKAYS BOESKY FIRMS' MOVE TO PROTECT FUNDS
The Securities and Exchange
Commission approved a request by two firms controlled by inside
trader Ivan Boesky that allows them to take steps to protect
hundreds of millions of dollars from potential claimants.
    The SEC granted requests made by Seemala Partners L.P. and
IFB Managing Partnership L.P., to withdraw as registered
brokers, effective March 12.
    With the action, the partnerships are no longer subject to
the SEC's net capital rules requiring them to remain solvent as
brokerage firms. Seemala argued the move would be necessary if
noteholders of Ivan Boesky and Co L.P. are to be repaid.
    In asking the SEC to speed its withdrawal as a registered
broker, Seemala said it wold repay to Boesky and Co, which is
also controlled by the former Wall Street arbitrageur, 660 mln
dlrs in subordinated debt, plus accrued interest.
    IFB Managing Partners, which was also given approval to
withdraw as a broker, has no significant assets, the SEC said.
    Once it is repaid, Boesky and Co will pay 200 mln dlrs in
senior participating notes and 440 mln dlrs in subordinated
participating notes of Hudson Funding Corp to certain
noteholders, Seemala told the SEC.
    Under the planned repayment scheme, Seemala told the SEC
the noteholders would forgo claims of prepayment penalties and
some additional interest amounting to more than 100 mln dlrs.
    The plan would be in the public interest, Seemala argued,
since the noteholders, many of which are savings and loan
institutions and insurance companies, would receive repayment
of the principal on their notes.
    Seemala also argued that the plan would help the limited
partners of Boesky and Co, who were not charged in the Boesky
insider trading scandal, by protecting its remaining equity
from the noteholders' claims.
    Unless the Boesky firms are allowed to complete the
repayment plan, Seemala said Boesky and Co noteholders would
seek total claims of 116.8 mln dlrs, plus 9.2 mln dlrs to 10.6
mln dlrs a month in addition, in addition to other claims.
    Such claims could wipe out Boesky and Co's assets before
other creditors can establish their claims, Seemala said.
    The only opposition to Seemala's Feb 12 request to withdraw
as a broker came from Berger and Montague P.C., counsel for the
plaintiffs in a class action suit against Seemala and other
defendants. The suit involves charges stemming from Boesky's
insider trading in the stock of several major companies.
    Berger and Montague told the SEC it opposes the Seemala
proposal because it would allow Boesky and Co noteholders to
settle their claims ahead of the plaintiffs in the class action
and because Seemala did not disclose the total amount of claims
against it and what percentage defrauded investors would get.
    Seemala has said that its repayment scheme would leave a
pool of about 278 mln dlrs free of claims from Boesky and Co
noteholders which could satisfy other claimants.
    The pool would be in addition to funds placed in escrow
under insider trading settlement agreements, including 11.4 mln
dlrs from Dennis Levine and 50 mln dlrs from Boesky.
    In approving the request, the SEC barred Seemala and Boesky
and Co from making any distributions to its limited partners
for one year and required limited partners who receive
distributions to agree to make themselves liabile up to a point
in any case filed the partnerships.
    The SEC also required Seemala and Boesky and Co to get
confirmation of their assets from a nationally recognized
accounting firm.
    The agency said Boesky and Co and existing and potential
claimants against it have similar interests in eliminating
major creditors and preserving assets for future claims.
 Reuter
