Fraud – Will Hedge Funds Produce The Following Really Big One?

July 26, 2012 · Posted in Education · Comment 

Making an investment in hedge funds is also great decision but you want to ask your investment fraud attorney .

For thousands of years investment advisors have been asking financiers to give them cash so they could invest it for them. Even after Charles Ponzi in the 1920′s, backers have continued to give investment counsels cash to invest. The retirement fund industry has been the biggest vehicle, but is very regulated and has produced few frauds. Uncontrolled investment schemes, such as PONZI schemes and its brother, ponzi operations, have been the most fertile kinds of investment fund frauds. Hedge funds could be the next significant auto. Hedge funds have gained in recognition to a stupefying investment amount of over $2 trillion, according to the SEC. Over 2,400 investment counsellors have registered 11,500 hedge funds with the SEC this year.

So why would hedge funds produce the next extremely big crime? According to the Association of Authorized Crime Examiners and Financial Accounts Standards Board, the environment for crime includes 3 factors, “incentives/pressures, opportunities, and disposition/rationalization.” The hedge fund chief certainly has the pressure from his backers to supply results. He has also got an uncontrolled environment to work in manufacturing the break. Additionally the high-risk/high reward attitude of the manager makes him likelier to take the danger of scamming his stockholders.

A quick review of the SEC legal proceedings releases in the past year shows increased activity against hedge funds, including: altering audited fiscal reports, hiding losses, creating a fictitious auditor, insider trading, market timing (funds), misappropriation, misrepresentation to stockholders, non-disclosure to the SEC, and stock manipulation. These crimes were not limited to small or offshore funds, but included funds with hundreds of millions of bucks operating throughout the US. Are these all the frauds occurring? No, but these are simply the ones that the SEC has litigated against. No one knows in this unregulated environment how many frauds are occurring today.

Since hedge funds remain a popular investment vehicle, how can a backer defend against these frauds? Like any investment, the financier must do due diligence before investing in a fund. The financier should review the funds offering materials, investment goals, checked finance reports, background of investment advisors and other documentation provided by the fund. He should confirm the dimensions of the portfolio with the fund’s custodian. He should check the background of the personnel of the investment advisor working on the fund. He should check for regulatory action against the investment advisor and its staff. He should evaluate the ability of the outside auditor. He should decide who prepares the periodic finance statements provided investors and whether there is third-party oversight. He should define if the fund has registered with the SEC. He should check with others in the industry that have knowledge about the fund.

After the investment is made the investor’s required groundwork shouldn't stop. Lots of the documented hedge fund frauds have not started at the beginning of the fund, but after the financiers became comfy. The investment advisors continue being forced to supply results or lose their investors. The investor should continue to review the reports sent to him by the fund. He should confirm the scale of the portfolio with the custodian on a periodic basis. He should watch for changes in auditors and other 3rd parties. He should be alert for any regulator action against the fund or its counsellors. He should not let the early withdrawal penalties stop him from withdrawing at the first sign of difficulty. In most of the documented cases, there's not much left, after discovery of the fraud and the litigation to recover from the conmen and 3rd parties.

The answer's that some hedge funds are defrauding their investors while they aren't closer regulated. With the increasing recognition and size of a few of these uncontrolled funds, one of these may become the next very big fraud. Don't be the financier caught in it!

Mr. Cuthill’s practice is restricted to court-appointed positions in enormous fraud cases. His work has produced the return of millions of bucks of backers ‘ funds.

The article above is all about the finra arbitration and finra attorney . The writer is Wilma Sebastiano.

Home Occupancy Fraud Back On the Charts

July 21, 2012 · Posted in Education · Comment 

Till about May of 2007 there were plenty of non-conforming loan programs available for high loan to worth real-estate investment purchases. In reality it was still comparatively simple for a borrower with a 660 middle credit score and half a year of reserves to buy an investment property with no money down. Then unexpectedly all non-conforming banks lost their final investors and that deal vaporized. The investment fraud attorney handles occupancy crime.

Overnight, seemingly, it changed into a need for a borrower to have ten percent or more down payment to get a non-owner occupied property. Deals that were already in process across the land and scheduled to close were abruptly not able any longer to do so. The banks who were underwriting the loans offered little help and, in reality failed in many cases even to combat and ask for ten % equity injection from the borrower. So the loan officer, the property agents, the seller, the title firms, and the borrower were basically “hung out to dry”.

Lest you believe there wasn't any way around this issue may I explain what definitely happened in mortgage brokerages and investment conferences across the nation: At least many of these same loans were resubmitted to a different lender not as an investment property but instead as an owner occupied first residence. It is an old serpent come back to slither thru the property finance industry.

Until about 2005 this was the number 1 type of real estate investment crime committed by industry insiders. Factually we fought with this practice for a few years until non-conforming loan solutions became available to property investors. Normally we identified this form of crime by looking into just a few points of the loan application. Those points are still valid today and any underwriter concentrating on the file can simply spot these flags for fraud and pull the file for mitigation.

Does it make sense, as an example, for a consumer to move from a three-thousand plus square feet home in the burbs priced at four-hundred-thousand bucks to a twelve-hundred sq. feet home in the town value at one-hundred-eighty thousand greenbacks? Not likely. There are many alternative routes to detect this kind of fraud which I will not expose because these are the tools of my trade used in identifying and deter this kind of fraudulent activity.

If you, as a buyer, are nervous about being caught in a web of crime and would never deliberately commit mortgage fraud let me include a few pointers for you. If you're quoted a rate of interest by one bank of, for example, nine p.c for a mortgage to purchase a property investment property using 15 p.c down-payment but another bank quotes, as an example, 7 percent and no deposit you are most likely speaking to a loan officer who either knows nothing about pricing a loan or proposes to have you commit mortgage fraud so they can earn a commission check.

The FBI says that over 80 p.c of mortgage crime involves insider collusion. Chances are , however , if you sign on the line indicating you mean to occupy a property as your first residence but one or two years down the line it is discovered you never occupied the property but instead used it as an investment property it'll be you who has signed your name indicating you probably did mean to occupy. Not doing so either willfully or innocently puts you at risk of being charged with mortgage fraud for profit. Your loan arrangement will generally enable you only thirty days to take occupancy of the property.

Not being ignorant of the fact that this will continue to occur partly because many borrowers cannot know how this is fraud and believe it doesn't hurt anyone let me take you on a short journey. There had been a youngster who worked for many years to save sufficient funds to become a bank. He had only enough to loan to one purchase deal and made his lending guidelines to protect his funds. He required the person purchasing the property to live in it because he knew if it was an investment property and the individual fell on hard times that person would pay his very own home payment before he paid the payment on his investment properties. In other words the primary residence presented a much lower risk.

The young man did indeed fund a closing for a nice young woman who was buying her first home. She was so excited and had so many plans about how she would paint, retry the kitchen, put in new hardwoods, and landscape to give the home some excellent curb appeal. The young man was excited for the young lady, he sponsored the transaction and was pleased when he was given his. First few mortgage payments.

Several months went by where the young man was receiving his payments on time till one month he didn't receive his payment punctually. He sent a letter to the young woman who indicated she would not be capable of making her payments thanks to the fact the folks renting the home from her had moved out and left the home in awful condition.

At the end the young man had to take re-possession of the property which required thousands of greenbacks to come back to market condition. Rather than going through all that trouble he ultimately accepted a short sale offer on the property for many thousands of dollars in lost cash. At last the young man’s hope of helping folk with his good, fair loans were destroyed. The cause? Nothing less than occupancy fraud.

But what about if the payments are always made on time? Nobody gets hurt then, right? Wrong. Lending is risk based. The loan made on that property was based mostly on risk that was mitigated by the borrower saying she would occupy the property. This reduced the down-payment wants as well as the interest rate. The hurt was done on the secondary market when the Small Old Ladies Medical Insurance Fund purchased the loan (had the loan been sold). They got a loan which should have been performing at a lower market exposure and higher monthly income to negate the chance. Actually the mortgage pool was poisoned and could bring down the house.

Summing it up there is not any way around the indisputable fact that, with only a few mitigating circumstances, owner occupancy statements can cause mortgage fraud. This is almost always categorized by the FBI as “fraud for profit”. Stay clear. Don't do it. There are lots of techniques you'll be caught and many of them occur well after the closing date.

The manuscript above is all about finra arbitration and finra lawyers . The writer is Darlyn Entatano.