Still reeling from the effects dealt by the current economic crisis, the financial sector took another blow this time landing where it hurts most, close to its heart! This was bitter to no end as it points to one of its big boys in the community being the culprit of a fraudulent (Ponzi) styled scheme. The accused is former NASDAQ chairman Bernard Lawrence Madoff and until recently chairman of Bernard L. Madoff Investments Securities, the vehicle he used to siphoned $50 Billion from unsuspecting and clueless investors.
Mr. Madoff’s style of investment baffled and amazed Wall Street pundits for having scored 72 gaining months in a row while posting only 4 months down in 15 years. No one would have ever imagined Mr. Madoff business prowess was nothing less of a dubious Ponzi style scheme character. A scheme named after Charles Ponzi who was responsible for duping thousands of New England residence into investing in a postage stamp speculation during the 1920’s.
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Among those investors who fell prey to Mr. Madoff’s worthless scam were:
1.Fairfield Greenwich Group (FGG) – Leading alternative asset investment specialist. Its mission is to offer clients superior funds and related products with a high level of client service and support. This firm has internally managed its own hedge fund and selectively identified external managers for a limited number of close relationship.
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2.Banco Santander Central Hispano (STD) – The company offers retail banking and consumer finance in Spain and most parts in Europe. Through its subsidiaries it offers asset management, private banking, corporate and banking investment.
3.Tremont Capital Management – Leader in investment management of hedge fund products and multi-management portfolio.
4.HSBC (HBC) – One of the world’s top bank by assets. It has more than 10,000 offices in 80 countries providing consumer and commercial banking services, credit cards, asset management, private banking, securities undertaking and trading, insurance and leasing.
5.BNP Paribas (BNP) – One of the main bank in Europe. It came about through the merger of Banque Nationale de Paris and Paribas. It offers complete banking services through its branches worldwide.
Questions were once again poised at the financials. Its credibility already tarnished from the credit debacle of 2007- 2008 is repeatedly put on the line as public sentiment is further dampened. An avalanche of queries mostly centering in scam prevention and remedies are to be address with earnest.
1.Due diligence. Done in the same manner as companies do when acquiring targeted companies. This method covers all aspects in relations to the company’s and funds itself.
A.Ask the company’s directors and officers list. It is under the company’s prospectus. Find out who they are and background. How long are they in this business? Are they knowledgeable enough, meaning their education, training and experience are necessary ingredients.
B.What products do they market and how? They should provide you materials, explaining, how they manage funds. This can be found in the company’s prospectus.
C.Historical returns – Ask them for an updated return for several years showing quantity data.
D.Asset Under Management – Get a copy of the fund portfolio, this can be requested from the custodian of the funds.
E.Audited Financial Statement – Both the company and the fund has this statement jot down the name of the accounting firm for they are liable too. Study the statements.
F.Registration Papers – Demand for a copy of the regulatory registration and other pertinent documents for confirmation of its legitimacy.
2.Stay away from high yield fast return scheme. Chances are your money will disappear faster.
3.Stay away from secrecy. Non-disclosure of facts means their hiding something.
4.Always consult a professional. An independent third party who is familiar with fund management can certainly pitch in his 2 cents worth and give you a clearer picture of the fund.
Mr. Madoff did avoid much scrutiny on his funds but a disclosure requirement by clients could have opened some issues on his company like his past SEC investigations. Even if he got away from those investigations, the impact generated as being on a constant SEC query on his company can send signals to investors to stay away from Bernard L. Madoff Investment Securities.
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[tags] NASDAQ, Bernard Lawrence Madoff, Bernard L. Madoff Investments Securities, Wall Street, Charles Ponzi, New England, Tremont Capital Management, Due diligence, portfolio, SEC, HBC, HSBC Hldgs. PLC ADS [/tags]