UK REGULATORS PUTS THE GOLDEN GREENWICH COUPLE IN IT'S CROSS HAIRS
Madoff ‘Feeder Funds’ Said to Be Probed by UK FSA
Bloomberg
Britain’s financial regulator is investigating the involvement of so-called feeder funds in Bernard Madoff’s alleged $50 billion fraud, according to two people with knowledge of the case.
The Financial Services Authority is looking at how U.K. regulated firms were involved in what Madoff allegedly said was a “giant Ponzi scheme,” the people said on condition of anonymity because the subject of the probe isn’t public. The FSA is also reviewing the role of custodian banks, the people said.
Feeder funds took money from investors and placed it with Madoff’s Bernard L. Madoff Investment Securities LLC. The U.K. Serious Fraud Office said last week it’s investigating Madoff’s U.K. operations, which managed his family’s personal funds.
“The FSA’s task is to look after its own backyard but also to help with the Americans’ backyard,” said Tony Woodcock, a regulatory lawyer at London-based Stephenson Harwood. “While the FSA will probably be looking at civil proceedings, ultimately if a U.S. offense has been committed on British soil, there could be an extradition.”
Other European nations have also begun probes into Madoff’s alleged fraud. Paris prosecutors said last week that they were reviewing whether French investors who lost money were victims of a crime. The FSA will be looking into whether fund strategies were deliberately misrepresented, said Woodcock.
‘Investor Protection’
“The FSA is going to be more interested in investor protection and whether compensation should be paid to investors,” said Andrew Shrimpton, a London-based hedge-fund adviser from Kinetic Partners who used to head the FSA’s alternative investment team. “The SFO will be more directly interested in the employees of the Madoff firm in London.”
Stephen Raven, the head of Madoff Securities International Ltd., the London-based proprietary trading firm that invested Madoff’s family money, said in an interview that he “knew nothing” about the alleged crime, and that he is cooperating with the FSA and the SFO.
The investigations are at an early stage and the people with knowledge of them didn’t mention firms by name. The FSA has said it expects companies that it regulates to comprehend the strategy of funds they invest in.
Dan Waters, the FSA’s director of retail policy and conduct risk, said the regulator had started “examining the issues as they relate to us.”
Custodians
FIM Advisers LLP, a London-based investment firm run by Carlo Grosso and Federico Ceretti, is a consultant to Bermuda- based Kingate Management Ltd., which manages the Kingate funds that invested with Madoff. A call to FIM’s London offices today wasn’t answered.
Fairfield Greenwich Group, Walter Noel’s hedge-fund firm that had $7.5 billion with Madoff, was sued this week for at least the third time by investors in the U.S. over claims it failed to protect their assets. It has 18 employees in London who are licensed by the FSA, according to the regulator’s Web site.
“Fairfield Greenwich intends to cooperate with all regulatory procedures,” said Thomas Mulligan, a New-York based spokesman for the firm.
The FSA is also looking at whether financial custodians’ duties were breached, the people said. Custodians are typically banks charged with oversight of funds’ cash inflows and payments to investors........
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