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Elliott’s move came two days before AR Magazine was scheduled to submit its response before the New York State Supreme Court over the hedge fund’s petition to compel AR to reveal the source of a news article regarding the fund’s quarterly performance.

John Pelosi, a partner with Pelosi Wolf Effron & Spates law firm, which represents AR magazine in the case, was quoted by AR as saying: “The fact they filed this notice voluntary discontinuance means they knew their motions was meritless and would not success. It’s clear that they totally ignored applicable precedent and privilege afforded under the New York shield law to reporters in New York.”

AR’s Editor-in-Chief Michelle Celarier also criticized Elliott’s court case describing it as a “blatant attempt to bully us,” which backfired. She said the incident should serve as a lesson to those who seek disclosure of confidential information from the media.

Celarier said in her affidavit: “Because hedge funds are private investment vehicles, little information about them is available to the public. New financial regulation is passed in Congress this year will change that very little. At the same time, this industry controls close to $2tln in assets globally. Historically hedge funds were for the super wealthy, but now college endowments and corporate and public pensions are becoming their dominant investors. These investors have long clamored for more transparency, a call that became louder after the financial crisis of 2008… Our economy, our educational institutions and our retirements are best served by a financial media that is independent of financial pressure or coercion.”

Celarier’s affidavit was supposed to be submitted on Sept. 02.

The legal battle between Elliott and AR magazine started when the hedge fund filed a petition before the New York Supreme Court asking the trade publication to name the source of the article so they could initiate an internal investigation and determine who leaked its investor report.

Elliott maintained that disclosure of its quarterly position would hurt its competitive edge against rival hedge funds.

According to the New York Observer, AR’s article was picked up by several publications including the New York Post. And the subsequent petition by Elliott caused a major outcry among the media industry claiming the court case violated freedom of speech.

Elliott case highlights hedge fund transparency and New York shield law
Among the thorny issues that cropped up in the Elliott vs AR magazine case are whether trading positions found in investor letters are proprietary information, as some fund managers claim, and the issue of transparency in the hedge fund industry, as demanded by investors and lately regulators.

In an exclusive interview with Opalesque on Monday, Nick Roger, partner at global law firm Ogier explained that there are three ways in which fund managers can claim confidentiality of their information. One is to include a statement on the document stating that no information or data can be disclosed or reproduced. Another is to require investors to sign an undertaking to pledge to keep any information regarding the fund confidential. And finally, fund managers can copyright investor communications.

For his part, Paul Chain, partner at the global firm AIS Fund Administration, said the definition of transparency is really quite a big issue among fund administrators and investors. “Just as there are some things that a manager should be allowed to keep secret because they are related to the ways that manager keeps their edge in the market, there are some things that should not be kept secret.” (See yesterday’s Opalesque Exclusive: here).

Sept. 9 hearing cancelled
With the withdrawal of Elliott’s petition, the scheduled Sept. 9 hearing of the case has already been cancelled by the court, reported the Wall Street Journal.
- Precy Dumlao