Madoff Securities case occurred because of fraudulent investment schemes due to lack of regulation as well as insufficient oversight of specific financial intermediaries along with dismissal of opportunistic behavior. To understand why such an incident happened in the first place, it is important to identify the kind of scheme led by Madoff. It is called a Ponzi scheme. In a Ponzi scheme, an unsustainably big pool of investors must be maintained to keep it afloat. It begins with a simple promise to a few investors of doubling an amount they decided to invest. Rather than investing that money and doubling it, the person involved in the scheme takes money from a successive round of investors and the scheme continues (Knapp, 2011). The formula is ROI-R-I.The reason why the Ponzi scheme went unnoticed for so long was partly because of Madoff's reputation and a huge regulatory hole. This major discrepancy some say (regulators) was brought on by limited resources, lack of coordination and communication, and a fragmented oversight among agencies. Regulators could not uncover fraud and instead played catch up, especially with Madoff because he understood how the market worked. For example, he never collected a management fee, effectively preventing the raising of red flags with regulators. He also maintained everything without creation of customer accounts allowing Finra to treat it as counterparty. Probes were made as early as 1992 and again in 1999, 2006, and 2008 (Knapp, 2011). Yet nothing was ever substantiated to the point Madoff would be arrested. That is why the government aimed to centralize regulation in order to avoid cases like Madoff and his Ponzi scheme.
In regards to the ten million dollar investment, independent auditors must have assessed the materiality of investment, the amount and nature of assets, transactions, and liabilities executed, and the exact risks that may reveal a realistic likelihood of quantifiable misstatement...
Judgment in Managerial Decision Making: The Ponzi Scheme Everyone makes decisions, both good and bad, throughout their lives. Recently, there has been quite a bit of talk about the bad decisions that businesses and their executives have made. Issues like the stock market and sub-prime mortgage issues have financially devastated some people, as have Ponzi schemes. These types of schemes create fraudulent investments that seen to offer great rates of return
.." The Federal Reserve continues to keep a watch on both "current and potential exposures..." And are in the process of a review of the collateral valuation methods of the banking industry." (Kohn, 2008) Kohn states that disruptions in liquidity in some financial markets have resulted in banking organizations facing challenges and specifically at present "significant liquidity demands can emanate from both the asset and liability of the bank's balance sheet."
Over the course of time, assertive laws are evolving which are supposed to deal with any issues quickly. This means that all financial firms will face higher costs and greater amounts of time in complying with these new guidelines. ("Dodd Frank") Conclusion Clearly, the Bernard Madoff scandal reshaped investor confidence and the regulatory environment. This is because many of his clients suffered tremendously from the firm's activities. In some cases, individuals
Economics of Healthcare The Economics of Health Care The healthcare in the United States is a system of economics that has been referred to as a Ponzi scheme and most assuredly, the economics of the U.S. healthcare system are unsound at best. The United States is the only industrialized nation in the world that fails to provide universal access to basic health care and according to the work of Kilchevsky (2004), 'the
Unfortunately, determining which fund to go with for a retail investor is difficult, as there are many unscrupulous fund managers who might seek to take advantage of the fact that they are playing with other people's money and making (at least) the management fee. This can lead even scrupulous hedge fund managers to take unnecessary risks. The danger of hedge funds being mismanaged truly cannot be overstated. For example, Bernie
In the first-round survey, a majority of investors cited diversification as their main objective in allocating to hedge funds. Among the second-round interviewees who were planning to increase their target allocations by 10% or more, half named diversification as the motivating factor. Among the approximately one in ten who were planning to decrease allocations by at least 10%, concern with a lack of transparency was the most frequently cited
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