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In an interview with MarketWatch, Bernard Madoff described the many ways that he says the markets are unfair to the retail investor. But that’s not all. He also laid out five steps that market regulators should take to level the playing field. Here are Madoff’s five best ideas for making the markets fair:
1.) The SEC needs more resources to protect investors.
The SEC is grossly undercapitalized and doesn’t have money to hire the right people. Basically, it’s a training ground, and by the time its people are qualified they leave for work at private firms. “They didn’t catch me because the whistleblower, Harry Markopolos, was leading them down the wrong alley,” Madoff told MarketWatch. “He was an idiot.”
More on MarketWatch [...]
As her renown in the elite world of quarter horse breeding grew, Rita Crundwell kept her unglamorous day job as the $80,000-a-year comptroller of Dixon, Ill., a working-class city of nearly 16,000, most famous as the boyhood home of Ronald Reagan. Year after year, she delivered the bad budget numbers to councilmen and department heads–numbers that meant streets couldn’t be repaved, ambulance equipment couldn’t be purchased, and replacement radios for cops and firefighters would have to wait. Eventually the city workforce was cut. When asked in 2011 about the city’s worsening cash crunch, Crundwell blamed lagging payments from the state, which collects and remits Dixon’s share of tax revenues. It was a display of chutzpah worthy of Bernie Madoff. In fact, the money had arrived, and she had spent it–on herself. Between 1991 and April 2012 she embezzled $53.7 million from Dixon, using the loot to acquire 400 quarter horses (the quintessential American racehorse), a ranch in Dixon and horse trailers and trucks. She traveled to equestrian competitions in a $2 million motor home and remodeled her Illinois home with an in-ground pool and a chandelier made of old revolvers and spurs, in addition to buying another home in Englewood, Fla., minks, jewels, a 1967 Corvette convertible and a bar of gold bullion valued at $1.5 million. More in Forbes [...]
Collapsed brokerage MF Global Holdings Ltd on Tuesday effectively ended its bankruptcy, saying court-appointed trustee Louis Freeh will step down and hand the estate’s remaining wind-down duties to a new three-member board. The commodities broker, led by former New Jersey Gov. Jon Corzine, went into court-protected bankruptcy in 2011 after investors were spooked by its exposure to $6.3 billion in European sovereign debt. The company’s liquidation plan put together by Freeh, a former FBI director, and MF Global’s creditors, was approved by bankruptcy Judge Martin Glenn in April, and the plan went into effect on Tuesday. More on Reuters [...]
Securities regulators are grossly underequipped to police financial markets, hedge funds are a danger to the market, and criminals have been scamming investors since the beginning of time and are not going to stop anytime soon. Those are just a few of the observations made by Bernard Madoff in a recent interview about whether the financial markets are fair and how retail investors can protect themselves from fraudsters like him. In the interview, he described decades of dodging scrutiny from toothless regulators and gullible customers and said retail investors are the least well-informed market participants. After all those years of racing to remain a step ahead of the authorities, Madoff has a few ideas about how the market can be made more fair for retail investors. Among them: The Securities and Exchange Commission should be beefed up, hedge funds need to be registered and brokerages should have independent custodians. Madoff, serving 150 years for orchestrating the biggest Ponzi scheme in history, bilked his clients of billions of dollars and fooled regulators for decades before he was caught, tried and sent to prison. More on Market Watch [...]
One of the most important lessons investors learned from the financial crisis of 2008 was the need for investment strategies that focused on capital preservation and risk management. Many include this as part of their due diligence when selecting someone to manage their money. However, there remains a very important risk that the average wealthy investor is still not aware of despite its potential to completely wipe out a portfolio. The good news is that it’s relatively simple to mitigate. To determine if you have taken on this risk, look at the initial cheque used to fund your account and see if it’s made out to the firm managing your money. The reason is that having third-party custody (holding the investments separate from the person or firm managing the investments) adds a very important layer of investor protection. More in the Financial Post [...]
The Financial Industry Regulatory Authority (FINRA), Wall Street’s watchdog, has asked the brokerage arms of Wells Fargo & Co and Bank of America Corp to pay more than $5 million in reimbursement and fine for selling floating-rate bank loan funds. FINRA ordered Wells Fargo Advisors LLC to reimburse about $2 million and pay an additional $1.25 million in fine. It asked Bank of America’s Merrill Lynch unit to reimburse about $1.1 million and pay $900,000 in fine. The brokerages have been asked to reimburse the amount because the risk tolerance limit and financial conditions of their customers did not justify the purchases, FINRA said. More on Reuters [...]
More and more embarrassing stories of keep leaking out of the SEC, which is beginning to look somehow worse than corrupt – it’s hard to find the right language exactly, but “aggressively clueless” comes pretty close to summing up the atmosphere that seems to be ruling the country’s top financial gendarmes. The most recent contribution to the broadening canvas of dysfunction and incompetence surrounding the SEC is a whistleblower complaint filed by 56-year-old Kathleen Furey, a senior lawyer who worked in the New York Regional Office (NYRO), the agency outpost with direct jurisdiction over Wall Street. Furey’s complaint is full of startling revelations about the SEC, but the most amazing of them is that Furey and the other 20-odd lawyers who worked in her unit at the NYRO were actually barred by a superior from bringing cases under two of the four main securities laws governing Wall Street, the Investment Advisors Act of 1940 and the Investment Company Act of 1940. More in Rolling Stone [...]
If you missed CNBC’s American Greed episode on the Phil Barry Ponzi scheme, you can watch the video at:
The lush white mansion for sale at 34 Pheasant Run in Old Westbury on Long Island makes a grand first impression. It has a long, winding driveway; a tennis court; a two-bedroom pool house surrounded by lavish gardens; a parade of antiques in its hallways; and marble in hues of lapis and gold throughout the ground floor. A collection of walking sticks tagged for sale in the foyer. In many ways, the house is quite beautiful. But it is also a place full of shadows, a haunting just visible in its empty silver picture frames and in the red, white and blue signs that hang on every door: “United States Marshal,” the signs say. “No Trespassing.” The shadow behind all that opulence is other people’s money. This was one of the residences of Peter B. Madoff, chief compliance officer at the firm owned by his older brother, Bernard L. Madoff. More in the New York Times [...]
Woody Allen takes on the Bernie Madoff scandal in his coming movie “Blue Jasmine.” Speakeasy took in a screening of the coming film last night, which [SPOILER ALERT] tells the fictional tale of a high-society wife (played by Cate Blanchett, who will likely generate early Oscar buzz) and her husband (Alec Baldwin, in a performance that is sure to be talked about). The Baldwin character goes to jail for some crooked financial dealings, leaving Blanchett’s character to deal with the economic and emotional aftermath. More in the Wall Street Journal [...]
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