What we really want to know is how to beat the next Bernie, the next Stanford, or the next Greenwood and Walsh. Investors won't get their cash back with answers to the past. That money is gone. It's a sunk cost.
I know only one foolproof way to beat fraud: separate money management from reporting. You can hire that lights-out investment manager. But keep all your assets with a custodial bank like State Street or Pershing. They report your account value, not the money manager. It's like separating church and state.
Source: Beating Bernie
Once the financial crisis stabilizes and the economy recovers, everybody starts feeling rich. Appetite for risk increase and the fund managers will be out in force trying to promote their high-yield products. The whole cycle may repeat itself and who knows, this time, the US government may be helpless.
Ben Bernanke and Obama have spoken about regulation to protect financial institutions from themselves. This insightful article provides a new direction for the administration going forward - separate money managers from the reporting function.
This will be the cornerstone to prevent further financial scams. What do you guys think?