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Hedge fund sues WSJ for disclosure

Date: Thursday, November 27, 2008
Author: Megan Murphy and James Mackintosh, Financial Times

SRM Global, the hedge fund run by the former star UBS trader Jon Wood, is suing The Wall Street Journal for publishing allegedly confidential information about its performance, setting up a high-stakes battle over the industry's transparency.

SRM claims the newspaper acted in "flagrant disregard'' of its rights by publishing in August that the fund was down about 85 per cent since its inception in 2006.

The case, which is due before the High Court next week, threatens to make it harder for media organisations to publish data that have been circulated among investors in the notoriously secret and largely offshore investment pools.

The crisis in the industry - which is having its worst year on record - has prompted many funds to reduce disclosure as they worry that information about their performance could lead rivals to bet against their investments, further hurting them.

SRM, which was the largest shareholder in Northern Rock before the bank was nationalised and held a big position in Countrywide of the US, has warned investors it could take action against them if they passed on performance information.

Its dispute with the WSJ stems from two articles published on the newspaper's website, "Woods Fund Takes a Beating" and "Hedge Fund Suffers Sharp Losses".

Despite having a confidentiality agreement in place, the Monaco-based fund claims that performance data were apparently given to a London-based WSJ journalist last summer.

After warning the reporter that the information was "confidential", SRM sought a High Court injunction restraining the WSJ's European edition from publication just hours before the articles were posted, according to court documents.

"It is to be inferred that the defendant's editorial staff and those responsible for the publication of the confidential information calculated that the defendant stood to gain more from publishing the articles in flagrant disregard of the claimant's rights than if the claimant sued,'' the lawsuit states.

The WSJ denies the information was confidential and maintains in its defence that the articles were "responsible journalism on matters of legitimate public interest".

Citing Mr Wood's spat with the government over the valuation of Northern Rock - which is currently before the High Court - as well as a public dispute with the steel billionaire Lakshmi Mittal, the WSJ says SRM has cultivated media attention in the past "whenever they considered it to be in their interests to do so".