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Odey scandal prompts Wall Street rethink on how to vet hedge funds

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Wall Street firms are poised to reassess how they vet hedge funds, industry sources and experts say, following a race to cut ties with Odey Asset Management after founder Crispin Odey was accused of sexual misconduct in the press.

The Financial Times and Tortoise Media, in a joint publication on June 8, reported allegations by 13 women that Odey – one of Britain’s best-known hedge fund managers – had sexually assaulted or harassed them over a 25-year period.

Within hours of that report being published, Wall Street firms including Goldman Sachs, JPMorgan and Morgan Stanley began reviewing prime broking ties with Odey Asset Management, which they then went on to cut.

Odey last week told Reuters that the report was a “rehash of an old article and none of the allegations have been stood up in a courtroom or an investigation.” A spokesperson for the hedge fund declined further comment on Thursday. Odey has since declined calls and messages.

OAM is now breaking up its funds and employees are moving to rivals following the allegations.

Big banks typically agree terms with hedge funds that allow them to cut ties at short notice, five sources from prime brokerages and hedge funds told Reuters.

They may decide to interpret those existing agreements differently to avoid being associated with scandal as they face greater scrutiny on their tolerance for misconduct even when it is making them money.

“Whilst the prime brokers have lagged, they are now catching up. They will likely no longer lend to managers with governance issues similar to those of Epstein or Archegos,” said Michael Oliver Weinberg at the family office, CMT Portfolio Advisers.

JPMorgan Chase agreed this week to pay about $290 million to settle a class action by victims of the late Jeffrey Epstein over the bank’s relationship with the disgraced financier.

Archegos Capital Management founder Bill Hwang allegedly hid his fund’s extreme exposure from its lenders before collapsing in 2021, raising questions about banks’ risk management policies as they faced losses of up to $10 billion.

All of the banks mentioned in this story declined to comment when asked about the vetting process between their prime brokerage services and hedge funds.

Prime brokers lend hedge funds money to make trades. They also often introduce them to new investors. Hedge funds that routinely take a short position on a stock – borrowing shares they do not own to sell them – cannot function without a prime brokerage. OAM takes long and short positions in equities.

Banks covet prime brokerage business – which generated more than $15 billion in annual revenue in recent years – as it enables firms to also offer those clients other services, such as wealth management and investment banking.

Prime brokerages may now refine due diligence processes and perform more thorough background checks on hedge funds, said Jim Neumann, chief investment officer of Sussex Partners, which advises investors on how they give their money to hedge funds.

“Whether or not the prime brokerages should have been aware of any improprieties will be discussed and investigated,” said Neumann.

According to the FT, Odey fired his executive committee in 2021 after he had been given a written warning on how to communicate with female staff. Odey was cleared of indecent assault charges by a British court earlier that year.

END GAME

Goldman Sachs, UBS, Morgan Stanley and JPMorgan have started to wind down service agreements they had with the firm, sources told Reuters. This can take up to 90 days, but the process is often shorter, one of the sources said.

Reasons to sever ties can include when a fund loses money, if it is sued, or goes bankrupt. Sometimes clauses about regulatory approval for employees or the departure of a key person from the fund can mean the end of a relationship, according to a former banker, a hedge fund manager and a prime broker who spoke on condition of anonymity.

But many of these agreements mainly focus on the financial viability of the hedge fund, two of the sources said.

One hedge fund manager said he was asked in his due diligence with the bank if he was approved by the UK regulator, the Financial Conduct Authority. That was enough to pass the checks at the time, some years ago, he said.

Moreover, these agreements typically are not reviewed or amended, the sources added.

Epstein, Archegos and now Odey may have brought a turning point for banks, said several insiders. Any chance of a bad actor and the banks will run, a second hedge fund manager said. They will use terms already baked in to contracts rather than ignore them, the prime broker that spoke to Reuters said.

In the financial services industry there appears to be “a culture of permissiveness towards predatory and abusive conduct towards women in the workplace,” said Erika Kelton, a lawyer at U.S. legal practice Phillips & Cohen, who represents whistleblowers.

“This will change when not only individuals are held accountable, but when firms too are made responsible for their failures of control and governance.”

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Romanians vote in presidential election focused on high living costs, Ukraine war

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By Luiza Ilie

BUCHAREST (Reuters) -Romanians started voting on Sunday in the first round of a presidential election that may give hard-right politician George Simion a chance of winning, with voters focused on high living costs and the country’s support for Ukraine.

Opinion surveys show leftist Prime Minister Marcel Ciolacu, 56, leader of Romania’s largest party, the Social Democrats, will make it into the run-off vote on Dec. 8, with Simion, 38, of the Alliance for Uniting Romanians the likely runner-up.

About 3.7 million Romanians, or 20.7% of registered voters in the European Union and NATO state, had cast their ballots across the country by 1045 GMT, data showed. Voting ends at 1900 GMT with exit polls to follow immediately.

Voting by Romanians abroad, who can influence the result and where the hard right leader is popular, began on Friday.

Analysts expect Ciolacu to win the second round against Simion, appealing to moderates and touting his experience running Romania during a war next door.

But the prospect of a Ciolacu-Simion run-off vote could mobilise centre-right voters in favour of Elena Lasconi, leader of opposition Save Romania Union, ranked third in opinion surveys, analysts said.

Simion has cast the election as a choice between an entrenched political class beholden to foreign interests in Brussels and himself, an outsider who will defend Romania’s economy and sovereignty.

He opposes military aid to Ukraine and supports a peace plan as envisioned by U.S. President-elect Donald Trump, whom he admires, and would support a government that emulates that of Italy’s Giorgia Meloni.

“We want peace, the war must end so we stop being afraid,” 76-year-old Valentin Ion said after voting in Bucharest.

“Politicians must be more understanding and give money to the needy.”

Romania has the EU’s largest share of people at risk of poverty. Ciolacu’s coalition government of his Social Democrats (PSD) and centre-right Liberals has raised the minimum wage and increased pensions twice this year, but high budget spending has swollen deficits and kept inflation high.

“I am taking my parents and my children to go vote for PSD, it is the best party, Marcel Ciolacu gave us so much,” said Vasile Popa, 46.

Since Russia attacked Ukraine in 2022, Romania has enabled the export of millions of tons of grain through its Black Sea port of Constanta and provided military aid, including the donation of a Patriot air defence battery.

FAMILY VALUES

“The outcome is still very difficult to predict due to the high concentration of candidates and the splitting of the centre-right vote,” said Sergiu Miscoiu, a political science professor at Babes-Bolyai University.

Most candidates, he said, have campaigned on conservative messages such as protecting family values.

“Mainstream party candidates have a very catch-all message, on the one hand the nation, the army, religion and so on. On the other hand, we see a commitment to Europe, although it is seen more as a revenue source than an inspiration for values.”

© Reuters. A voter exits a voting booth, on the day of the first round of the presidential election in Bucharest, Romania, November 24, 2024. REUTERS/Andreea Campeanu

Outgoing two-term president Klaus Iohannis, 65, had cemented Romania’s strong pro-Western stance but was accused of not doing enough to fight corruption.

Romania’s president, limited to two five-year terms, has a semi-executive role which includes heading the armed forces.

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Israeli army orders Gaza City suburb evacuated, spurring new wave of displacement

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By Nidal al-Mughrabi

CAIRO (Reuters) -The Israeli military issued new evacuation orders to residents in areas of an eastern Gaza City suburb, setting off a new wave of displacement on Sunday, and a Gaza hospital director was injured in an Israeli drone attack, Palestinian medics said.

The new orders for the Shejaia suburb posted by the Israeli army spokesperson on X on Saturday night were blamed on Palestinian militants firing rockets from that heavily built-up district in the north of the Gaza Strip.

“For your safety, you must evacuate immediately to the south,” the military’s post said. The rocket volley on Saturday was claimed by Hamas’ armed wing, which said it had targeted an Israeli army base over the border.

Footage circulated on social and Palestinian media, which Reuters could not immediately verify, showed residents leaving Shejaia on donkey carts and rickshaws, with others, including children carrying backpacks, walking.

Families living in the targeted areas began fleeing their homes after nightfall on Saturday and into Sunday’s early hours, residents and Palestinian media said – the latest in multiple waves of displacement since the war began 13 months ago.

In central Gaza, health officials said at least 10 Palestinians were killed in Israeli airstrikes on the urban camps of Al-Maghazi and Al-Bureij since Saturday night.

Adding to the miseries of Gaza’s 2.3 million people, most of whom have been repeatedly displaced, heavy winter rain flooded hundreds of tents across the enclave, spoiling food and sweeping away plastic and cloth sheeting that had protected them against the elements.

“We ran in the middle of the night, the rainwater flooded the tent, the food is gone, the kids screamed and I am afraid they will get sick,” Rami, 37, a Gaza City man displaced at a former soccer stadium, told Reuters via a messaging app.

The Palestinian Civil Emergency Service said thousands of displaced people were impacted by the seasonal flooding and demanded new tents and caravans from aid donors to shield them.

HOSPITAL DIRECTOR WOUNDED BY GUNFIRE

In north Gaza, where Israeli forces have been operating against regrouping Hamas militants since early last month, health officials said an Israeli drone dropped bombs on Kamal Adwan Hospital, injuring its director Hussam Abu Safiya.

“This will not stop us from completing our humanitarian mission and we will continue to do this job at any cost,” Abu Safiya said in a video statement circulated by the health ministry on Sunday.

“We are being targeted daily. They targeted me a while ago but this will not deter us…,” he said from his hospital bed.

Israeli forces say armed militants use civilian buildings including housing blocks, hospitals and schools for operational cover. Hamas denies this, accusing Israeli forces of indiscriminately targeting populated areas.

Kamal Adwan is one of three hospitals in north Gaza that are barely operational as the health ministry said the Israeli forces have detained and expelled medical staff and prevented emergency medical, food and fuel supplies from reaching them.

In the past few weeks, Israel said it had facilitated the delivery of medical and fuel supplies and the transfer of patients from north Gaza hospitals in collaboration with international agencies such as the World Health Organization.

Residents in three embattled north Gaza towns – Jabalia, Beit Lahiya and Beit Hanoun – said Israeli forces had blown up hundreds of houses since renewing operations in an area that Israel said months ago had been cleared of militants.

Palestinians say Israel appears determined to depopulate the area permanently to create a buffer zone along the northern edge of Gaza, an accusation Israel denies.

© Reuters. Displaced Palestinian children stand near tents following rainfall, amid the Israel-Hamas conflict, in Gaza City November 24, 2024. REUTERS/Dawoud Abu Alkas

Israel’s campaign in Gaza has killed more than 44,000 people, uprooted nearly the entire population at least once, according to Gaza officials, while reducing wide swathes of the narrow coastal territory to rubble.

The war erupted in response to a cross-border attack by Hamas-led militants on Oct. 7, 2023 in which gunmen killed around 1,200 people and took more than 250 hostages back to Gaza, according to Israeli tallies.

(Reporting and writing by Nidal al-Mughrabi; editing by Mark Heinrich)

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Green activists in S. Korea demand tough action on plastic waste at UN talks

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By Minwoo Park and Daewoung Kim

BUSAN, South Korea (Reuters) – Hundreds of environmental campaigners marched on Saturday in the South Korean city of Busan to demand stronger global commitments to fight plastic waste at U.N. talks in the city next week.

About a thousand people, including members of indigenous groups, young people and informal waste collectors, took part in the rally, the organiser said, with some carrying banners saying “Cut plastic production” and “Drastic plastic reduction now!”.

The activists marched around the Busan Exhibition and Convention Centre, where the fifth session of the Intergovernmental Negotiating Committee (INC-5) will take place from Monday to discuss a legally binding global agreement on plastic pollution.

Debate is expected to focus on whether the deal should seek to slash production, while major producers such as Saudi Arabia and China have said in previous rounds that it should prioritise less contentious strategies, such as waste management.

“We are here with Greenpeace and our allies in the Break Free from Plastic movement to represent the millions of people around the world that are demanding that world leaders address plastic pollution by reducing the amount of plastic that we produce in the first place,” said Graham Forbes, global plastic campaign lead at Greenpeace.

People from different countries and of all ages took part in Saturday’s rally and some wore elaborate, decorated hats made from discarded plastic items.

“It looks like the Earth, and a living creature, because I wanted to say our living creatures are being affected by plastic pollution,” said Lee Kyoung-ah, 52, who was wearing a hat made of abandoned plastic buoy.

Lee Min-sung, 26, said he also hoped to see changes in everyday consumer habits.

© Reuters. Climate activists march on a street to demand stronger global commitments to fight plastic waste at the upcoming fifth session of the Intergovernmental Negotiating Committee (INC-5), in Busan, South Korea, November 23, 2024.   REUTERS/Minwoo Park

“I hope the culture of using ‘reusables’ becomes a cool, trendy movement, as that will reduce (waste) little by little,” said Lee, who brought his lunch from home in a glass container.

“I will pick up trash more often, whenever I have time, and throw away less to save the Earth,” said fourth-grader Kim Seo-yul, who flew from her home in Jeju Island to join the march.

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