Archive: Cristina McEachern
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Madoff Used SEC Incompetence to Lure Investors

Sep 3, 2009 @ 11:04 AM By Cristina McEachern Gibbs,

It was pretty obvious that SEC Inspector General David Kotz’s internal review of the agency’s missteps around the Madoff fraud wasn’t going to be pretty. But when the executive summary was released yesterday I couldn’t pull myself away.

The details around how exactly the SEC botched each individual complaint it received about Madoff and his questionable practices were very interesting. Particularly that every time they were set to ask an outside third party for trade or counter party verification for some reason the documents were never sent.

Several times they never got out the door and if they had, if one person had actually sent the document they were supposed to send, the fraud would have easily been uncovered years ago.

But what also caught my eye and was surprisingly damaging to the agency’s reputation I would think was the part about how Madoff used the fact that the SEC had investigated his firm and found nothing to then assure investors their money would be safe.

He knowingly used the fact that the SEC had been in and examined his firm and did not detect any fraud to allay investor fears. And apparently they bought it—it’s a government regulatory agency charged with protecting investors, of course they bought it.

According to the executive summary, “We also found that investors who may have been uncertain about whether to invest with Madoff were reassured by the fact that the SEC had investigated and/or examined Madoff, or entities that did business with Madoff, and found no evidence of fraud.”

And even better, “Moreover, we found that Madoff proactively informed potential investors that the SEC had examined his operations. When potential investors expressed hesitation about investing with Madoff, he cited the prior SEC examinations to establish credibility and allay suspicions or investor doubts that may have arisen while due diligence was being conducted.”

So he was playing into the investor confidence in a government regulatory agency to do its job and its due diligence. The summary continues, “Thus, the fact the SEC had conducted examinations and investigations and did not detect the fraud, lent credibility to Madoff’s operations and had the effect of encouraging additional individuals and entities to invest with him.”

As feeder funds are being shredded to bits in the press and by investors for not doing their due diligence it will be interesting to see how the SEC fares after this revelation. Lawsuits are popping up left and right against these feeder funds. Even the state of Massachusetts is suing one of the biggest feeder funds, Fairfield Greenwich Advisors, for fraud.

It seems the SEC did not do its due diligence either and investors were the victims. Now it’s out in the open. Could there be other repercussions for the agency?

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How Has Trading Changed for You?

Dec 2, 2008 @ 04:25 PM By Cristina McEachern Gibbs, Continue reading ...

Win an iPhone: Enter the AT Photo Contest

Aug 14, 2007 @ 11:41 AM By Cristina McEachern Gibbs,

Are you a Tech Savvy Trader? Then send us a photo of your desktop and you could win an iPhone!

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Instinet Appoints New Co-CEOs

Jun 8, 2007 @ 10:20 AM By Cristina McEachern Gibbs,

Instinet announced big changes to its top executive ranks today. The company appointed Fumiki Kondo and Anthony Abenante as new co-chief executive officers.

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ITG Appoints New Business Development Head

May 30, 2007 @ 11:20 AM By Cristina McEachern Gibbs,

Investment Technology Group has named Richard Herr to the new position of senior vice president, strategic and business development. Herr will be charged with oversight of strategic partnership opportunities and acquisitions at the company.

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Bear Stearns Asset Management Makes Strategic Hires

May 9, 2007 @ 12:50 PM By Cristina McEachern Gibbs, Continue reading ...

Will Geyer New President and COO at JonesTrading

May 2, 2007 @ 12:05 PM By Cristina McEachern Gibbs,

Will Geyer joins JonesTrading as the agency brokerage's new president and COO. The appointment comes on the heels of a $50 million equity financing investment from Friedman Fleischer & Lowe.

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NYMEX Buys Into Optionable

Apr 13, 2007 @ 11:17 AM By Cristina McEachern Gibbs,

As Nasdaq continues its drive to make its mark in the options market with a potential Philadelphia Stock Exchange merger, the NYMEX is also beefing up its stake in electronic options trading. NYMEX completed its purchase of a 19 percent stake in energy derivatives brokerage firm Optionable this week.

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Hong Kong Hedge Fund Sets Up Shop with TradingScreen and Imagine

Apr 11, 2007 @ 11:49 AM By Cristina McEachern Gibbs,

DragonBack Capital, a Hong Kong-based multi-strategy hedge fund, officially launched in March and is busy building up its assets and portfolio. Three partners are heading up the fund with combined experience in the Asia Pacific markets of more than 50 years, which CEO Robert Lance says gives his fund a distinct local advantage.

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Trading Up: Executive Moves in the Industry

Apr 10, 2007 @ 04:01 PM By Cristina McEachern Gibbs,

Recent Executive Appointments at Jordan & Jodan, Nasdaq and Aqua

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ISE Announces Succession Plan

Apr 2, 2007 @ 12:20 PM By Cristina McEachern Gibbs,

The International Securities Exchange (ISE) has announced that its current president and CEO, David Krell, will retire on January 1, 2008. Krell will remain a member of the ISE’s Board of Directors. Pending the appropriate approvals, the Board expects to elect Krell Chairman, replacing current chairman Frank Jones, who will also stay on as a member of the Board.

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Man Financial Launches Fixed Income ATS

Mar 28, 2007 @ 04:07 PM By Cristina McEachern Gibbs,

Man Financial, the U.K.-based futures broker, has implemented SDS Financial Technologies’ alternative trading system (ATS) and launched its Man E-Finance Fixed Income Marketplace.

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Hedge Fund Buying Frenzy Continues

Mar 14, 2007 @ 02:39 PM By Cristina McEachern Gibbs,

The latest major deal in the investment bank/hedge fund phenomenon came from Lehman Brothers this week. The firm announced it was buying a 20 percent stake in hedge fund manager the D.E. Shaw group, which currently has about $29 billion in aggregate investment capital.

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