Bernie Madoff Bailout and Hedge-finance Regulation
Slide 2Outline Background Bailout? Control Moving Forward Conclusion & Ponzi Schemes Moving Forward
Slide 3Outline Background Bailout? Control Moving Forward Conclusion & Ponzi Schemes Moving Forward
Slide 4Gravity
Slide 5World\'s Largest Ponzi Scheme The chapter 11 court discharged a 162-page list naming a huge number of Madoff casualties, including: ◊ Aozora Bank (Japan) ◊ Nordea Bank (Sweden) ◊ Bank Medici (Austria) ◊ New York University ◊ HSBC ◊ John Malkovich ◊ ◊ Steven Spielberg ◊ Fairfield Greenwich ◊ Kevin Bacon ◊
Slide 6Begs the questions 1) How could this plan continue for so long? 2) How could such a large number of modern people be taken in by a store that gave no information on how it could accomplish reliable returns of 8-13% for a long time, amid both great and awful circumstances?
Slide 720+ Years of dishonesty SEC made an awful showing with regards to directing. They too were gotten up to speed with the buildup encompassing financial specialists. Part Strike Strategy – complex with many moving parts.
Slide 8Begs the questions 1) How could this plan continue for so long? 2) How could such a large number of complex people be taken in by a store that gave no data on how it could accomplish reliable returns of 8-13% for a long time, amid both great and awful circumstances?
Slide 9Information Cascades Each progressive speculator accepted that the past financial specialist did their due determination "Data falls" – sort of like playing phone. Maybe "complex" money related organizations are NOT insusceptible from buildups
Slide 10Bernard L. Madoff Professional Accomplishments: Founder of Bernard L .Madoff Investment Securities (BMIS) Chairman of the Board of NASDAQ Founding Member of the International Securities Clearing Corporation in London Board of Governors of National Association of Securities Dealers
Slide 11Exclusive Circle: Club Madoff Bernie Madoff Ruth Madoff\'s Friends Exclusive Circle International Banks; College Endowments Feeder Funds Mutual Funds
Slide 12Outline Background Bailout? Control Moving Forward Conclusion & Ponzi Schemes Moving Forward
Slide 13Yes Bailout . . . . Millions were influenced Not just well off office people, additionally hands on people with retirement stores oversaw by one of the feeder reserves. Support stock investments Bailout It\'s been done before with achievement, i.e. LTCM.
Slide 14LTCM v. Madoff
Slide 15LTCM v. Madoff
Slide 16No Bailout Legal Remedy Available People are now bringing claims against Madoff and feeder stores. Bailout will support Ponzi Schemes If government safeguards Ponzi conspire members, then citizens remain to lose more cash than Ponzi players. This boosts a reasonable individual to share in the following Ponzi diversion as opposed to maintain a strategic distance from it.
Slide 17Outline Background Bailout? Control Moving Forward Conclusion & Ponzi Schemes Moving Forward
Slide 18What is a Hedge Fund? Unregistered, secretly oversaw pools of capital Equity investments Leverage and short offering Absolute return Why direct? Long haul motivating force arrangement Retailization Systemic hazard
Slide 19Securities Act of 1933 Section 4. Exempted Transactions Regulation D, Rule 501 "Licensed Investor" Calculating buyers Regulation D, Rule 506 No more than 35 buyers Sophisticated buyers
Slide 20Securities Exchange Act of 1934 "Merchant" versus "Broker" In the matter of purchasing and offering securities Registration under 15(b) Section 12. Enrollment Requirements for Securities More than 500 holders of record, and Assets in abundance of $10M
Slide 21Investment Companies Act of 1940 Section 3(c). Encourage exceptions 3(c)(1) –type support stock investments Up to 100 speculators No open offerings 3(c)(7) – sort fence investments Up to 500 qualified buyers No open offerings "Qualified Purchaser"
Slide 22Investment Advisors Act of 1940 Section 203(b). Enlistment of Investment Advisors Fewer than 15 customers in recent months, and Doesn\'t hold self out as a venture guide
Slide 23Other Commodity Exchange Act FINRA ERISA Department of Treasury Fraud
Slide 24Madoff: Repeated Investigations 1999: SEC send inspectors to audit exchanging rehearses 2000: SEC sends analysts to survey exchanging hones 2004: SEC explores front running assertions 2005: NASD surveys Madoff 2005: SEC examines front running claims 2006: SEC researches Ponzi Scheme affirmations
Slide 25Madoff Skeptics Harry Markopolos Mark Occrant Erin Arvedlund
Slide 26SEC: Organizational Problems Understaffed Lawyers not money related specialists Political impacts Little hindrance impact GAO study – 92% of flexible investments in study were not in consistence.
Slide 27Any Lessons Learned from LTCM? "Interesting qualities and impossible occasions" Amount of influence is once in a while observed today Private gatherings were eager to purchase LTCM Counterparties could have retained misfortunes from a default
Slide 28Outline Background Bailout? Control Moving Forward Conclusion & Ponzi Schemes Moving Forward
Slide 29In the end… No Bailout for Madoff casualties Regulation laws appear to be fine. The issue is the general population running the association.
Slide 30How to Succeed in a Ponzi Scheme Don\'t grow too quick. Indicate terrible numbers now and again. Run while you\'re ahead.