it seized from a Bermuda currency-trading fund to the fund's Daiwa account.

Bloomberg news said funds would be frozen there during hearings on whether Daiwa's seizure of the funds was legal. Daiwa seized $33 million from the account of Bermuda-based RCM Global Long Term Capital Appreciation Fund Ltd.

on July 24 to cover a $35 million loss in a separate account at Daiwa held by fund manager Rowayton Capital.

Daiwa the same day filed suit in New York State Supreme Court in Manhattan seeking a ruling that its seizure was proper.

Yesterday, New York State Supreme Court Justice Walter M. Schackman granted a temporary restraining order returning the $33 million to the Daiwa account as the defendants requested.

Justice Schackman wrote in his decision,"As a general proposition, it would seem accurate to say that the proprietary account of a trading adviser is something quite distinct from the account of a mutual fund on behalf of which the adviser is working. This casts doubt on the correctness of what was done.'' Rowayton Capital Management is owned by former Salomon Brothers currency trader Bill Lipschutz. There has been anxiety from other mutual fund companies that had invested in RCM, because much like RCM, they have been unable to properly quote their net asset value (NAV) to investors since Daiwa's actions.

Mr. Paul Thorne, Corporate trust manager at International Corporate Management of Bermuda Ltd., a Bermuda Commercial Bank subsidiary that administrates the fund, said, "Some funds have suspended their calculation of NAV, pending this outcome. You have at least half a dozen, or even eight or nine mutual funds which have deferred making any decisions.'' Mr. Thorne further said of Daiwa, "From a common sense point of view, I can't see how they (Daiwa) could succeed, but from a legal view it may be a different matter.'' One member of the mutual fund division of the Bermuda Association of Securities Dealers, Mrs. Anne Kast of Kast Investment Management Ltd. said this week the Daiwa seizure is a surprising development in the industry.

"To have a mutual fund's asset seized like that is such an unusual situation, and certainly the people who are invested in the fund would have great difficulty,'' she said. "They can't get in and can't get out, and they can't value their portfolios. That is a very distressing situation. How this unfolds legally is going to be very interesting. There are suddenly a whole list of questions that need to be answered. What documentation did Daiwa have to seize the assets? Who signed the documentation? How could they bundle the assets of 15 funds and treat them like one account? Where did the authority come from?'' Bloomberg said that Magnum Fund Management in the British Virgin Islands, for one, halted all redemptions and new investment in its Magnum Aggressive Growth fund because it couldn't value its investment in RCM Global. The Magnum Aggressive Growth fund owns 500 shares of RCM Global, valued at about $550,000 before the seizure by Daiwa.

Daiwa said in court documents it had the right to seize the assets of RCM Global based on a contract signed with Rowayton in May saying affiliates could be held responsible if Daiwa or Rowayton defaulted on foreign-exchange deals.

As a Bermuda fund, RCM Global falls under the regulation, inspection and supervisory powers of the Bermuda Monetary Authority (BMA). General manager, Mr. Malcolm Williams, said that the BMA would await a court ruling.

He said, "We're certainly watching the actions of all the parties with interest and obviously concern. At the moment, it's a legal matter, so as far as we're concerned, it's sub judice. Depending on the outcome of the court case, we will know the extent we might wish to do a review of the mutual fund industry. Episodes of this nature are of particular importance to us. We must make sure that if it has happened illegally, it can't happen again and that the matter is properly rectified. It appears to be setting a precedent.

Sometimes precedents are not problems, but here, the precedent also seems to be a problem, not only for Bermuda, but for the mutual fund industry as a whole, around the world. The world mutual fund market is looking at this situation with interest. The Authority and the world market wants this matter reconciled...''