Does this law threaten the existence of every fund in the USA?

[Anaconda]

Quote from tradersboredom:

only hedge funds afraid of any 'regulation' is hedge funds that are involved in criminal activity or the partnership is a scam.

More regulation = more legal costs = lower returns.

Look at the reality. Madoff was overly secretive about his strategy. It's been suspected for years that he was lying about returns. The signs were there. Better due diligence should have been done on behalf of the investors.

 

[Cutten]

Quote from tradersboredom:

only hedge funds afraid of any 'regulation' is hedge funds that are involved in criminal activity or the partnership is a scam.

Wrong. Regulation imposes significant startup and ongoing costs, as well as extreme red tape and tedium. A few years ago I was looking into setting up a fund with a couple of other people, but nixed the idea as it would have cost about $250k just to get the thing regulated, then the annual overhead of paperwork and a compliance officer would have not only cost a lot, but (more importantly) been a royal pain in the ass to deal with.

Consequently, most people I know are down 30-50% this year in their retirement accounts, whereas I have had a good year. If there had been no regulation, they would have been up this year instead of seeing their life savings decimated.

Regulation designed to protect them has halved their expected retirement income. They have effectively been "half-Madoffed" by the nanny state. Note that none of this regulation in any way would have improved the security or returns I could have offered them. Most people who have the relevant financial/fund management qualifications are fairly clueless about markets, are poor traders, and are down 30-50% this year too. Jumping through a regulatory hoop is totally uncorrelated with money-management ability or honesty.

The prospect of serious jail time for fraud is sufficient deterrent to 99% of operators. And for those determined enough, like Madoff, we have seen that the regulatory regime is insufficient to deter them. The regulations thus impose a huge burden on entrepreneurs, a huge opportunity cost on investors, and make no material difference to determined fraudsters.

Your belief in regulations is therefore not only incorrect, but extremely harmful to both the people who you are trying to protect, and honest businessmen wishing to benefit them in return for a fair cut of the profits earned.

 

[stock777]

Quote from Cutten:

.....
Consequently, most people I know are down 30-50% this year in their retirement accounts, whereas I have had a good year. If there had been no regulation, they would have been up this year instead of seeing their life savings decimated.

wtf is that? smoke dope? nice batch ya gots there.

 

[LEAPup]

Quote from ProfitTakgFool:

Absolutely untrue. In fact, business is going to be great for those who survive this. Money will always find a home and people with money need a place to put it. The industry will become more regulated and people will become more careful but time has a way of healing all wounds. The HF industry isn't going anywhere.

Couldn't have said it better myself!

I started reading this thread thinking, "has most of ET lost it's mind?!?!" HF's and MutF's need to be shut down??? All are in a losing business???
ET being a contrarian indicator, I believe I'll start buying more equities.

Amazing!!!!

Thanks PFT for putting some common sense in this thread!

 

[LEAPup]

Quote from Angrycat:

All this clawback stuff refers to investment in a single pool like a hedge fund. That's the precedent set by Bayou.

Apparently, Madoff's investors were in managed accounts, not in a single pool like a hedge fund. Does the precedent still apply?

Correct! The Madoff (made-off) Clients weren't in a HF. They were Advisory Clients.

 

[LEAPup]

A retiree ignorantly puts their entire rollover IRA proceeds into one HF that turns out to be a ponzi.

You guys trying to tell me that their principal can be seized??? Lol!!! No way!!! There's some good crack smoking going on with that mentality! That's a dream US Supreme Court case for unreasonable search and seizure along with a ton of other laws violated by their principal being taken. I don't even see how the interest "earned" that was withdrawn could be an issue because the investor knew NOTHING of the scam. You have to show intent to get their $$$$ imo.