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From Kirsten Bischoff, New York: The demise of Bear Stearns will reverberate through the financial markets for some time and there are likely many lessons to be learned from the swift collapse of the once mighty bank. Of particular interest to the hedge fund industry are the vibrations that have shaken the prime brokerage market as many hedge fund managers scramble to determine the effects the default has on their various agreements with the bank. Some are taking the time to shine the spotlight back on their banking counterparties by reviewing prime brokerage contracts and addressing the risk their funds are at in regard to various “what if” scenarios (ie “what if there was a seemingly overnight collapse of an 85-year old banking institution?”).

Opalesque turned to Bob Sloan, Founder and Managing Partner of S3 Partners and former Head of Prime Brokerage at Credit Suisse and to Larry Cohen, partner at Morrison Cohen LLP – one of New York’s leading commercial law firms for some insight on the evaluation process fund managers should be undertaking as they review their prime brokerage contracts with Bear as well as with other banks.

Bear prime broker agreements Those managers with Bear prime broker contracts should be looking at the rights that are given pre- and post closeout. Although many funds shifted assets out of Bear prior to this weekend’s stunning announcement, what JP Morgan has done is step in with ......................

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