MF Global came into a financial problem due to the declining value of its $6.3 billion European Sovereign Debt portfolio. Moody's reported that MF's "sovereign risk exposure represented five times the company's tangible common equity." The MF Global bankruptcy has opened a pandora's box in the investment management industry. $630 million was supposed to remain in segregated customer accounts and it did not. UBS, Barings, Lehman Brothers, Bear Sterns, Long Term Capital Management, the list is recently building up.
The Investment Management industry has crossed the point of no return - and ruined a precious element called Trust. How can clients today be sure that these instances will not ever happen again? How can companies assure clients that their monies will not be used for other purposes? What is happening to the Regulation in the Investment Management industry? A big group of people obviously are not doing their jobs.
Why did the US Commodities Futures Trading Commission (CFTC) not ensure that MF Global's customer accounts were not tampered with? By the time the SEC stepped in, it was too late. The damage had been done and MF Global was inches away from collapse.
MF Global was leveraged at 44 to 1 - well above Lehman Brothers levels. Why did Regulators and Compliance not ensure that MF Global was not excessively leveraged?
These questions need to be answered and recent events have caused the
Investment Management Industry to enter into a tumultous phase in history.Trust and integrity are critical elements and once ruined are difficult to amend and repair. Regulators and corporates must seriously look into amending existing regulations to prevent such things from ever happening again. We seem to be repeating the same mantra everytime something goes wrong at a Wall Street Firm but enough is enough.
Banks and trading houses are ruining the very market that they make a living from. The interests of the customer are obviously not prioritised and instead financial professionals only care about their annual bonuses and upfront commissions. By ruining their reputations and breaking the clients trust, financial professionals are ruining the future of the global financial markets as well as the very client that they make a living from.
I am sure nobody on Wall Street intends to destroy the future of the
Investment Management Industry. Critical steps have to be taken as soon as possible.
Why are financial professionals putting their future in jeopardy by ruining the interests of their clients? Clients should be cultivated and handled with kid gloves. We should protect and secure the 'goose that lays the golden egg.' Financial professionals ought to educate their clients to win their trust and confidence and to remove fear and ignorance. Clients should be given direct and instant access to their monies and be updated at all times as to what is happening with their investments and the kind of risks that they are taking and exposed to.
Many of the clients of MF Global who moved their accounts to rival brokers were told to top up their margins or liquidate. This is not the way to treat clients who have obviously been mistreated. Clients have to be at all times informed and educated regarding volatile markets and explicitly be told what their downside risks are. Obviously they are not being informed adequately.
In the Investment Management Industry the latest question on every client's
mind would be: How safe is the firm I'm putting money in? Can they guarantee that they will not use client funds for other investments?
We at Peak Prosperity (HK) Ltd aim to take baby steps to remove these
nagging doubts. Our clients will be able to open a trading account in their own names with a Custodian Bank of their choice. The Client feels assured and has immediate access to his account at all times and is in full control of his investment. We then step in to advise the client how to create a tailor made portfolio for maximum returns. When the client makes a profit,he pays us a sliding scale performance fee. NO fees are charged if lossesare incurred.
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