very Common Misconceptions about Investor Protection
“Because I am with a large recognizable firm, I am insured” though the firm likely has a number of insurance policies, these will not apply to losses directly or indirectly from any fraud, dishonest or criminal acts committed by the owner of the policy, unless special endorsements are attached, and the firm is the named insured
“If my advisor stole my money, the large investment firm would make me whole” Many firms have a mandatory arbitration provisions clause in their investment management agreement, severely limiting customer options to a directly bring a lawsuit and to settle a dispute
“I already have investment insurance, that’s what FDIC and SIPC are for” By design these policies protect investors from an institution that becomes insolvent, they are limited in the amount of coverage they offer and do not cover Ponzi schemes
“Wrongdoings by an advisor would be covered by the firm” At what point would the investment firm pay the victim? The victim is left spending enormous amounts of money on attorneys and forensic accountants to purse the firm and the advisor, with no guarantee of receiving anything back
“I have known my advisor for years” Due to the increased complexity of investment management, advisors often use outside managers with specific skill sets, like hedge funds and SMAs, no amount of due diligence can account for the actions of others, Capital Shield® is the only guarantee for the whole ecosystem
“My investment firm would cover fraud by an outside manager they recommend” Most of the money invested with Bernie Madoff was through “feeder funds”, investors may be unaware of their RETURN OF CAPITAL risk, investment firms are not responsible for outside managers, Capital Shield® can insure these managers
“Ponzi schemes are a thing of the past, investors are protected and regulations put an end to them after Bernie Madoff” From 2012 to 2018 Ponzi Schemes occurred on average every 4-7 days with losses ranging from $800 MILLION to $3 BILLION annually