Bernie Madoff’s company was an SEC registered investment advisory firm when he voluntarily admitted he was running an illegal Ponzi scheme. He was not caught by a regulatory agency. In fact, being a regulated company may have helped him rip-off investors. They assumed he was legitimate because he was registered.
Why do so many bad guys hold current registrations and licenses? Why haven’t they been kicked out of the financial services industry? Why haven’t they been jailed “before” they destroyed the financial security of so many investors?
The regulatory auditors are good at reviewing record-keeping systems, sales literature, and code compliance. Most often, the auditors have legal or accounting backgrounds. However, they are not investment professionals. They don’t have the necessary investment knowledge to review sophisticated investment methodologies and trading strategies.
The reality is current registrations and licenses don’t mean much. You still have to conduct your own due diligence. It’s your money!