Principles of Managerial Finance
Principles of Managerial Finance
please read below adn write rebuttal
What are some hazards of allowing investors to pursue claims based on their most recent account statements? Court papers indicate that Madoff’s firm had about 4,800 investment client accounts as of November 30, 2008. And issued statements for that month reporting that client accounts held a total balance of about $65 billion, but actually held only a small fraction of that balance for clients. A series of e-mails that suggest JPMorgan continued to work with Mr. Madoff even as questions mounted about his operation. In one e-mail that surfaced in a separate lawsuit, a JPMorgan employee acknowledged that Mr. Madoff’s outsize returns seemed “a little too good to be true.”
What factors (in your opinion) might have prevented the Bernie Madoff scandal? Over several years many had suspicion about Madoff, he generated high returns year after year, seemingly with very little risk, Other investors employed similar strategies, which resulted in very different investment performances. (Gitman & Zutter, p 310). Madoff orchestrated a Ponzi scheme lasting decades that wiped out an estimated $17 billion in cash for his investors. Paper losses reached more than $64 billion. On June 15, 2007, when a JPMorgan committee met to ponder the proposal, new suspicions emerged about Mr. Madoff. A senior risk management officer at the bank e-mailed colleagues to report that another bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.” Harry Markopolos’ analysis was his third submission, a detailed 17-page memo entitled The World’s Largest Hedge Fund is a Fraud. He had also approached The Wall Street Journal about the existence of the Ponzi scheme in 2005, but its editors decided not to pursue the story. The memo specified 30 numbered red flags based on 174 months (a little over 14 years) of Madoff trades. The biggest red flag was that Madoff reported only seven losing months during this time, and those losses were almost statistically insignificant.
Do you believe that some of the key governmental bodies failed to do their job in the Madoff situation (NASDAQ, SEC, etc.)? The U.S. Securities and Exchange Commission (SEC) has come under fire for not investigating Madoff more thoroughly; questions about his firm had been raised as early as 1999. Madoff’s business, in the process of liquidation, was one of the top market makers on Wall Street and in 2008, the sixth largest. JPMorgan Chase’s national banking subsidiary, could plead guilty to a criminal violation of the Bank Secrecy Act, a federal law requiring financial institutions to report suspicious activity to the government. JPMorgan failed to alert federal authorities to Mr. Madoff’s conduct. JPMorgan served as Mr. Madoff’s primary bank for more than two decades, giving it a unique window onto his practices.
What lessons can investors and governmental bodies draw from the Bernie Madoff case? Some lessons investors, governmental bodies, and the common user can draw from this scandal, is first do your homework. Check, and re-recheck the validity of data well before committing to situations that “sounds too good to be true”. I have often used a saying to my battalion leadership throughout the years; trust and varify; “trust no one, and verify everything”.
Gitman and Zutter, Principles of Managerial Finance (13th ed.)
APA 2 sources
preview of the answer…
According to the Security Investor Protection Act, investors are not allowed to base their claims based on the recent account statements to produce consistently favorable investments returns that could not be achieved through the actual trading in the securities market (Gitman, & Zutter, 2011). This is because there may be investors who may have withdrawn their investment in the past more than they had invested formerly or earlierAPA 351 words