Madoff Scandal – How Bernie Madoff’s Ponzi Scheme Worked?

Bernard L. Madoff, simply known as Bernie is an American allegedly the operator of what is known as the largest Ponzi scheme in history. Bernie before his capture, acted as the stock broker, investment adviser and non-executive chairman of the NASDAQ stock market. It was not later than 2009 when Madoff pleaded guilty; he was guilty for turning his wealth management business into a massive Ponzi scheme. This scheme according to various sources defrauded thousands of investors billions of dollars.

In 1960, Bernard Madoff founded one of the biggest firms in Wall Street. He was the chairman of his company “Madoff Investment Securities LLC”, until his arrest was warranted on the December of 2008.… Read the rest

Comparison Between Merit Based Regulation and Disclosure Based Regulation

There are two basic models of regulatory system which is the supervision framework for securities market which is a merit based regulation and disclosure based regulation. These regulation systems are important to provide adequate investor protection and regulate business practices or codes of conduct that reduce systemic risks. 

Merit Based Regulation (MBR)

A securities regulator is needed, which control all matters relating to securities and to take all reasonable measures to preserve the confidence of investors in the securities market by ensuring sufficient security for such investors. The securities regulator has the discretion to approve the proposals with such revisions and subject to such terms and conditions as it deems fit.… Read the rest

Understanding the Insurance Underwriting Process

In order for the insurance companies to make profit and charge the appropriate rate for an insured, they undergo the underwriting process. In simpler words, insurance underwriting is a process of risk classification. The purpose of insurance underwriting is to spread risk among a pool of insured in a way that is both profitable for the insurer and fair to the customer. Insurance companies need to make a profit like many other businesses. Therefore, it doesn’t make sense if they sell insurance for everyone who applies for it. They may not want to charge an excessive high rate to the customer and also it is not good for them to charge the same premium to every policyholder.… Read the rest

Effective Communications in Investor Relations

Corporations worldwide work daily to increase the value of their stock for the investing public. In order to exploit this value, businesses must constantly make every effort to extensively communicate to their investors and potential investors. In view of this, investor relations are a vital part of business strategy, principally in the area of communication. Corporate departments involved with investor directions must make a necessary connection between efficient communication and company goals. Since communication is starting to play such an important role in investor relations, corporate communication programs are being created not only to participate in financial areas, but also to take part in media relations and other public communication.… Read the rest

Factors Conducive to the Growth of Mutual Funds

On observing the past trends, it can be seen that certain factors are essential for the growth of the mutual funds industry. These factors are:

  • Investor Base: A mutual fund makes it possible for investors to earn a higher return on their capital by pooling the capital of a large number of small investors and investing the pooled sum in a diversified manner. As the small investors cannot diversify on their own, their presence acts as a catalyst for the mutual funds to grow. As different investors have different investment requirements, their presence also acts as an incentive for the mutual funds to come up with new schemes, thus helping in further evolution of the industry.
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Entities which can register as FII’s in India

Entities who propose to invest their proprietary funds or on behalf of “broad based” funds (fund having more than twenty investors with no single investor holding more than 10 per cent of the shares or units of the fund) or of foreign corporate and individuals and belong to any of the under given categories can be registered for Foreign Institutional Investors (FII’s).

  • Pension Funds
  • Mutual Funds
  • Investment Trust
  • Insurance or reinsurance companies
  • Endowment Funds
  • University Funds
  • Foundations or Charitable Trusts or Charitable Societies who propose to invest on their own behalf
  • Asset Management Companies
  • Nominee Companies
  • Institutional Portfolio Managers
  • Trustees
  • Power of Attorney Holders
  • Banks
  • Foreign Government Agency
  • Foreign Central Bank
  • International or Multilateral Organization
  • or an Agency thereof

Some of the above mentioned types are described below:

Pension funds: A pension fund is a pool of assets that form an independent legal entity that are bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits.… Read the rest