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UK-based investors have joined those seeking AGBP50m-plus settlements from Bear Stearns over misleading investment advice.

Over the next few days at least eight London-based investors are expected to join legal action launched against the company after the collapse of two of its AGBP500m hedge funds. The law suit was launched in mid-August by Wall Street lawyer Jake Zamansky when the BSAM High Grade funds filed for bankruptcy protection after the company told investors that the funds had lost most of their value.

Mr. Zamansky said he was in contact with dozens of people, most of whom were wealthy investors in funds of funds. He added a number of those looking to recoup losses were based in London. He said the case underlined the need for transparency in hedge fund regulation. Mr. Zamansky said he was not intending to sue Bear Stearns in a traditional court case, but instead hoped to bring the disgruntled investors and the bank together in a series of arbitration meetings. The lawsuit comes at a critical time for the company as it recently announced a record 61 per cent drop in third quarter net income, its lowest quarterly profit in five years. The company's net income for the quarter was AGBP84m, down from AGBP216m for the third quarter of 2006. Bear Stearns said its exposure to the US sub-prime crisis had brought about the dramatic decline. James Cayne, chief executive of the company, said: "Market conditions in the mortgage and credit businesses were extremely challenging this quarter.

"A general re-pricing of risk in the market led to significant reductions in mortgage and credit-related revenues as volumes decreased while asset values declined." The firm added it may need to reduce its staff. James Molinaro, the group's chief financial officer, said if that were the case, redundancies were likely before the New Year. Investors will be updated about the company's position on 4 October.

The investment bank posted a decline in all of its business lines, except institutional equities - which hit a record high of AGBP355m - up 53 per cent on the same period in 2006. The bank said the increase was due to record results in structured equity products and trading net revenues.