September 20, 2010 Comments (0) Blog, Securities Fraud

Securities Fraud Investigation Involving 1861 Capital Discovery Domestic Fund

The White Law Group is investigating possible securities fraud involving the marketing and sale of the 1861 Capital Discovery Domestic Fund.

Specifically, we are investigating whether brokerage firms, including UBS, misrepresented the safety and security of the 1861 Capital Discovery Domestic Fund.

1861 Capital Management, the firm that created the 1861 Capital Discovery Domestic Fund, is a municipal arbitrage hedge fund. Its focus is on municipal arbitrage and attempting to take advantage of differences between municipal bonds and other types of debt, including Treasury securities and corporate bonds.

Municipal bond arbitrage generally consists of building a leveraged portfolio of tax-exempt municipal bonds and simultaneously hedging the duration risk in that municipal bond portfolio by shorting other debt instruments. Such hedging is often referred to as interest rate swaps. Obviously, this complex strategy is not without risk as the trading is typically highly leveraged – increasing the downsize loss potential.

Notwithstanding the risks of the 1861 Capital Discovery Domestic Fund, it appears that the investment was marketed and sold by UBS and other broker dealers as a safe, secure, and low-risk municipal bond portfolio. It further appears that these brokerage firms, in marketing 1861 to investors, targeted high net worth individual investors who were generally risk averse, took a conservative approach to investing and were interested in the safety and security offered by tax free municipal bonds.

If you have any information that may assist The White Law Group in its investigation into the sale of the 1861 Capital Discovery Domestic Fund, please contact the firm’s Chicago, Illinois office at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida. With over 30 years of securities law experience, including experience working at FINRA (f/k/a the NASD) and the SEC, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions.

For more information on The White Law Group, please visit our website at https://www.whitesecuritieslaw.com.

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