The arbitration claims were filed with the Financial Industry Regulatory Authority (FINRA) by a four-law firm legal team against Bear Stearns & Co., Inc. and Bear Stearns Securities Corp.

The Bear Stearns hedge fund at issue in the FINRA claims is the Bear Stearns High Grade Structured Credit Strategies Enhanced Leverage (Overseas) Fund.

According to Steven B. Caruso of Maddox Hargett & Caruso's office in New York City, which is a party to the claims:

"Bear Stearns did not properly disclose related party transactions, the true nature of the risk of the illiquid securities in the investment portfolio and failed to protect the interests of their clients. Our investigation indicates that officials at Bear Stearns engaged in a concerted effort to conceal the true state of affairs at both of these hedge funds for an extended period of time before they imploded."

Ryan Bakhtiari, of Aidikoff, Uhl & Bakhtiari added:

"Given Bear Stearns' dominance in the mortgage-backed securities underwriting market, they knew or should have known how much subprime exposure both of these hedge funds faced. We're finding, in our investigation of these funds, that many investors in these funds simply were unaware of what was being held in their portfolios because it was not adequately disclosed."