Today I want to bring to your attention an article that intended to serve to improve the financial and investment education of those who are interested in transferring their capital to asset management. Think Some moments in the most general approach to the problem would be without interest.
6 most common methods of fraud
«Clients are created, to remain without a penny. It remains to quickly remove from them more money and look for new customers! "- Said the senior partner of the brokerage firm, in which worked as the main character "Reminiscences of a Stock Operator". And although this book Edwin Lefevre published in 1923, representatives of investment companies still many ways to make money on customers - not just legally, but in most cases with complete impunity. Forbes spoke with the trader, the management company and an employee of a broker and found the six most common methods of fraud.
draw a good yield UIF with related structures
Regulators are tired of repeating that yield mutual funds in previous periods does not guarantee similar performance during periods of future. But consumers in these statements are not paying attention, what and enjoy some company. Inflate the profitability of the mutual fund can be a simple scheme. Asset Management the company buys for its mutual fund shares "Daisies" (the name is not accidental - in all circuits used paper of the second and lower levels) in an affiliate broker or a bank at a lower price. On the market these securities are traded for 100 rubles. The company also buys them for 85, re-evaluating, and instantly shows the yield the transaction at 18%. And the affiliate bank or broker to conceal a loss of accountability, buys stake in the fund. And there is no loss, and raised income shareholders are money.
shares sold to customers at inflated prices
Many problems associated with conflict of interest, because the management company itself trades on the exchange, and therefore can not sell to customers the best possible paper. Thus, the manager buys a stock trading account with "Daisies" and recommends buy them in their analytical reports, speaking of the great potential of growth. During the first days after the release of the report, the manager "scatters" the cost of securities by buying them for money all the same trading account, and often on the clients' money. Often, the manager makes it not alone, and agreeing with other investment companies. Seeing the rise in prices, the paper begin to buy and market investors. When the price soars enough, Managing sells all available his paper "Daisies." The cost of it after that just drops. If by the time fall in the price control does not manage to sell all the papers and on the part of the portfolio the transaction closes with a loss, this loss is most often reflected in the customer's account and not on account of the management company.
Leave a client illiquid securities in the portfolio
With the consent of the client manager buys shares in its share of "Daisies." They begin to grow. But the market not so much. Managing, understanding that growth will continue for a long time, he decides to cash in on clients' securities. He sells shares "Daisies" kinship structure, which keeps them before the end of growth period. A client manager explains that he was not sure to further increase prices and would take profits in the conservative phase.
junk bonds sold to customers
managers, buying bonds for their clients, explain this need to create an airbag - It's fixed-income instruments. But in a crisis, when defaults on corporate bonds have been so often, a new opportunity to gamble and for managers. Buy bonds "Daisies" for 40% of the nominal value and offers customers a highly promising for the 50% of the nominal value of strategies to keep to maturity. Managing earns its 10% of the cost of the paper in just a few minutes. In this case the client does not explain the risks to which the "Daisy" may declare a default on bonds or postpone payments on it for several years.
earn a commission
brokers, who earn on commissions on transactions of clients interested in maximizing the number of these transactions. Here loyal assistant broker - investment advisors, which are not formally managing the account, only give advice to clients. The most common method they use is called "shaking". This is when the first consultant gives advice to buy the paper (referring to the trading signals generated by the supposedly flawless proven robot), and Then during the day revising its forecast. Salary investkonsultantov tied to the amount of commissions from transactions. So, for example, in most brokerage houses the main strategy that the advisors recommend to their clients - intraday. After all, it assumes the maximum number of transactions.
bring down the "foot »
private investors and investment companies that buy the paper for 1-2 days and not sure that the next day the growth will continue, expose the so-called foot. This application to sell securities, which are automatically executed if the price for it reaches a certain level. These "feet" see the brokers through whom opened a trading account customers. So often in the opening exchanges, brokerage houses traders decide to "smuggle" paper. Why is this procedure so called? Traders choose an action "Daisies", which exhibited the most "stop » . Let's say, "Stop » exhibited at 50 rubles. A paper is being traded in the market for 70 rubles. Traders buy stocks "Daisies" for 70 rubles. And then sell them at once 50 rubles. Foot collapse, brokers again are buying the same stocks, but for 50 rubles. After that the price immediately returned to their previous level - 70 rubles, and traders make on the deal of 20 rubles per share.
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