Mutual Funds: Should the Government Put Sunlight on their practices and rid their operations of conflicts?

April 12, 2009



John C Bogle, the founder of the Vanguard Group may be onto something.  He has suggested that investment advisors and money managers for mutual and other funds haven’t done a good job at the kind of diligence that will protect their investors from

huge losses by stating, “How could so many highly skilled, highly paid securities analysts and researchers have failed to question the toxic-filled, leveraged balance sheets of Citigroup and other leading banks and investment banks.”


Mr. Bogle has also suggested that the government must apply a federal standard of a fiduciary duty to institutional money managers and that there is a deep conflict of interest because money management firms and their employees who now serve two masters, their shareholders (e.g. Lehman Brothers) and their fund clients and that such conflicts can be resolved only by separating the money management units from the larger publicly traded banks and investment firms.  For example, under such a plan, the Deutsche Bank Group would spin off DWS Investments, its mutual fund unit or Sun Life of Canada would divest itself of MFS Investment Management.


As Treasury and the SEC get more into the weeds with the systemic regulation of these funds, Mr. Bogle’s ideas desire serious consideration by both Congress and the regulators, as well as consideration of the number of independent directors on the boards of these publicly-traded funds.


I question if these captive boards as they now exist for the public-traded funds provide any check against the excesses in the recent past.


I encourage your comments.




Will regulation of the hedge funds and private equity firms make the Bank Asset Plan Fail?

April 11, 2009

It has been suggested that hedge funds and private equity firms

will be reluctant partners in Treasury’s public-private investment funds

because Treasury Secretary Geithner and SEC Chairman Schapiro have both asked that new systemic regulations be adopted to manage these industries. 


I would think the result of these regulations will be to require senior officers in these firms to certify that they have robust AML and fraud prevention programs.  After the Madoff Ponzi scheme, the UBS case and other recent examples of greed, I would think that these regulations would be welcomed by both industries.


What do you think?  I encourage your comments

Will a Bankruptcy Filing for Madoff really protect his victims?

April 11, 2009

It has been suggested that permitting Bernard

Madoff to file bankruptcy will help those who

invested with one of the many big hedge funds

that lost money in his Ponzi scheme.

I question whether this is true for those investors

in the feeder funds who may be only unsecured

claimants falling very low in the bankruptcy


Don’t you think that these investors would be

better served through a asset forfeiture or fraud

proceeding alleging securities law violations for

failure by the principals in these feeder funds to diligence

the Madoff investments and find out that fraud

was occurring over many years? 


Dean Marsan

Are Venture Capital Firms a Systemic Risk?

April 10, 2009

It has been argued by some that venture capital firms are not a systemic risk.  Since VC funds have the ability like private equity and the hedge funds to set up structures which permit U.S (and foreign investors) to both evade taxes and to launder their money through such investments, I would arguethat the SEC and Treasury’s desire to impose regulation on this industry is now warranted.


Small Investors May Be Enlisted in Bank Bailout and Echoes of War Bonds

April 9, 2009

I understand that Treasury may want to have Main Street American investors have the ability to invest in the bailout funds akin to a mutual fund investment.

I believe a legitimate question is raised about what happens if one or more of these large sponsors fails or the underlying fund “breaks the buck.” If all does not go well and the assets are ultimately sold by the bailout fund at a loss will the government and taxpayers underwrite the risk for these bank bailout bonds, or will the banks who are regulated by the banking regulators be charged additional fees to recoup these losses or will Main Street investors be asked to recognize these losses which some will argue are fundamentally attributable to the large money-center banks in the first place.
I encourage your comments.

Bank Stocks–Toxic Assets

April 9, 2009

I understand that the results of the federal stress tests for the largest banks are not now public information. I believe that there should be more transparency about the extent of the toxic assets on each bank’s balance sheet and a risk sensitivity assessment of what will happen to these banks liquidity, and Tier I capital if the economy worsens.

I would encourage your comments

Hello world!

April 9, 2009

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