Ponzi Scheme vs. Regulation Cost

Chidem Kurdas

Brokerages can play a key role in stopping fraud. Thus in 2008 Pershing stopped wiring money for its customer, Robert Allen Stanford’s Houston-based company.

Legg Mason Seeks SEC OK for Hybrid

Mutual fund heavyweight Legg Mason has applied to the US Securities and Exchange Commission for

Alternatives: Goldman vs. JP Morgan

Chidem Kurdas

Do alternative investments, primarily private equity and hedge funds, have a future at investment banks?

Will High-Frequency Trading Survive?

Chidem Kurdas

Computer-driven fast trading has become a piñata for governments everywhere. Proposed policies could make many algorithm-based strategies infeasible. This vilification does not make immediate sense. Is public interest better served by non-computer-driven slow trading?

Short Sellers Win

Chidem Kurdas

September was bad for most strategies but short-biased equity managers thrived. They’re by far the top performers year to date.

Who Will Pay for Bad Mortgages?

Chidem Kurdas

The good news is that the US economy continues to grow despite panic rounds caused by the European debt crisis. The not so good news: housing losses continue to drag the economy while regulators, banks, investors and homeowners battle over who will bear the brunt of the real estate bust.

The problem is how to allocate the losses, said Joseph Tracy, executive vice president at the Federal Reserve Bank of New York,

Ex-SEC Counsel $140,000 Madoff Benefit

Chidem Kurdas

It would make great satire. David Becker shaped regulatory policy for years as the Securities and Exchange Commission’s general counsel. His “wisdom and careful judgment” was celebrated by SEC Chair Mary Schapiro. Now his conflict of interest as an investor with Bernard Madoff is to be reviewed by Congress and the Justice Department. 

Madoff Trustee and the 1,001 Lawsuits

Chidem Kurdas

In one particular respect, government-appointed bankruptcy trustees resemble Scheherazade of the 1,001 Arabian Nights. She had a secure tenure with the Sultan as long as she kept spinning the fairy tales.

Madoff Black Box vs. Gut Feel

Chidem Kurdas

Bernard Madoff told Securities and Exchange Commission examiners an evolving tale as to how he made money. He started with a black box, which may sound like another reason to suspect computerized models. One examiner wrote: “no discretion on the part of Madoff—everything is determined by the black box.”

Then Madoff changed his tune. Yes the computer model signaled when to enter and exit the market, but he “was adamant he also uses his ‘gut feel’ to make these decisions.”

The lesson from this little story: it is better to be presented with a black box than to be told the guy’s gut is making the money. 

Madoff Registration: Regulator Reform

Chidem Kurdas

The Securities and Exchange Commission is working to improve its oversight process—-to prevent Madoff problems, as Michael Macchiaroli of the SEC’s Office of Risk Management described certain reform efforts at a conference of the New York State Society of CPAs.

The Dodd-Frank Act has created a rulemaking boom, including new rules for the implementation of mandatory SEC registration of hedge fund managers with more than $150 million in assets. It might help to look at what registration did in the past.  So let’s consider the last investment adviser registration filing with the SEC by Bernard Madoff.