FrontPoint Partners
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FrontPoint Partners was a
hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as s ...
that became well known for its bet against
subprime mortgage In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) is the provision of loans to people in the United States who may have difficulty maintaining the repayment schedule. Historically, subpri ...
s during the 2008 financial crisis under Steve Eisman. It was based in
Greenwich, Connecticut Greenwich (, ) is a town in southwestern Fairfield County, Connecticut, United States. At the 2020 census, the town had a total population of 63,518. The largest town on Connecticut's Gold Coast, Greenwich is home to many hedge funds and other ...
, with other offices in New York and London. FrontPoint was a registered
investment adviser A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory ...
in the United States and was wholly owned subsidiary of investment bank
Morgan Stanley Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...
. After Eisman left the firm, there was an investigation around insider trading. In August 2011, Frontpoint portfolio manager
Chip Skowron use both this parameter and , birth_date to display the person's date of birth, date of death, and age at death) --> , death_place = , death_cause = , body_discovered = , resting_place = , resting_place_coordinates = ...
pleaded guilty to insider trading and obstruction of justice. The remaining fund saw a significant decline in assets under management. It shut down most of its investments in 2011. Morgan Stanley filed a
civil lawsuit - A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used in reference to a civil actio ...
against Skowron in 2012, calling Skowron a “ faithless servant”. In 2013, Judge Shira Scheindlin of the U.S District Court of the Southern District of New York ruled on a motion for
summary judgment In law, a summary judgment (also judgment as a matter of law or summary disposition) is a judgment entered by a court for one party and against another party summarily, i.e., without a full trial. Summary judgments may be issued on the merits of ...
that Skowron must forfeit $31 million—100% of the compensation he earned from the firm between 2007 and 2010—to his employer, Morgan Stanley.


History

Frontpoint was founded in November 2000 by three principals, including two Tiger cubs.
Morgan Stanley Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the fir ...
purchased an equity position in the company in 2006, when Frontpoint had $5.5 billion in assets under management. Frontpoint became an indirect wholly owned subsidiary of Morgan Stanley. Steve Eisman served as a fund manager for FrontPoint Partners from 2004 until 2011. In October 2010, it was announced that Morgan Stanley, while maintaining a minority position, had handed control back to the managers of the firm. In November 2010, the firm was managing $7 billion. In April 2011, the Securities and Exchange Commission filed a complaint against Frontpoint portfolio manager
Chip Skowron use both this parameter and , birth_date to display the person's date of birth, date of death, and age at death) --> , death_place = , death_cause = , body_discovered = , resting_place = , resting_place_coordinates = ...
for trading on inside information and named six Frontpoint funds as relief defendants. In April 2011, Frontpoint agreed to pay the SEC more than $30 million in settlement of charges against Frontpoint. In August 2011, Skowron pleaded guilty in federal court in Manhattan to conspiracy to engage in insider trading and obstruction of justice. Skowron was sent to prison for five years. Morgan Stanley filed a separate
civil lawsuit - A lawsuit is a proceeding by a party or parties against another in the civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today. The term "lawsuit" is used in reference to a civil actio ...
against Skowron in October 2012, seeking the $33 million it paid the SEC, as well as the entire $32 million it had paid Skowron in compensation from 2007 to 2010. In its lawsuit, Morgan Stanley called Skowron a “ faithless servant” who lied repeatedly to continue being paid by Morgan Stanley and to avoid a blow to his reputation. A. Jeff Ifrah, co-author of ''Federal Sentencing for Business Crimes'', said: "The reputation of an employer like this one can get killed by the conduct of its employee," and seeking restitution "is certainly a good strategy" to recover a company's good reputation."Morgan Stanley seeks $10.2 million from convicted former trader,"
''GreenwichTime'', 14 January 2013.
In December 2013, Judge Shira Scheindlin of the U.S District Court of the Southern District of New York ruled on a motion for
summary judgment In law, a summary judgment (also judgment as a matter of law or summary disposition) is a judgment entered by a court for one party and against another party summarily, i.e., without a full trial. Summary judgments may be issued on the merits of ...
that Skowron must forfeit $31 million—100% of the compensation he earned from the firm between 2007 and 2010—to his employer, Morgan Stanley. The judge applied the legal doctrine of "faithless servant" to require Skowron to return his ill-gotten gains from the use of inside information to his employer, because he had engaged in insider trading, in violation of the firm's code of ethics, and failed to report his insider trading to the company. In May 2011, Frontpoint announced that it would shut down most of its funds by the end of the month.


References

{{DEFAULTSORT:FrontPoint Partners Tiger Cub firms Companies based in Greenwich, Connecticut Investment management companies of the United States 2000 establishments in Connecticut Hedge fund firms in Connecticut Hedge funds Privately held companies based in Connecticut Financial services companies established in 2000 Financial services companies disestablished in 2011