Tag: ponzi

A 10-point checklist for avoiding a visit to the offices of the SIPC with your hat in hand

The WSJ brings us this 10-point checklist that every gullible investor due diligence team should perform before investing in a fund:

1. Does the fund have an independent agency verifying the performance of their portfolios, and are they well known?

2. Are other service providers to the funds independent of the firm?

3. Is the firm a registered investment adviser, and has it undergone a regulatory audit?

4. Is there adequate separation between those running the money and the fund’s overall management?

5. Can you provide me with independent references for the manager and key people at the firm?

6. Have investors got access to management and timely updates on funds?

7. Are you blinded by the reputation of a manager or following the herd after hearing about a “superstar” manager?

8. Does it look too good to be true?

9. Have you learned lessons from former blow ups?

10. Has the fund ever been in a legal dispute with any investors past or present?

According to the prevailing wisdom, #7 and #8 seem to be the points this fairly comprehensive list of investors in the Madoff fund(s) should have paid particular attention to.