14 January 2012

How safe is your Fund?

The regulation of investment funds is contained in voluminous tomes in most countries. In addition supranational entities like the EU add their own regulations. So should the investor assume that any fund issued by a regulated investment firm is safe from fraud and malpractice? We have repeatedly warned that even investment funds domiciled in 'developed' countries like member states of the EU are not automatically fail-safe. Apart from the question how small countries like Luxembourg, Ireland or Malta could afford to reimburse investors for substantial losses it is by no means clear that the wording of the regulations is such that the rights of the investors are defined in a sufficiently clear way. As ongoing court cases in Luxembourg demonstrate, rubber paragraphs allow to drag on court cases for lengthy times and fund providers try every legal trick to wear down the hapless investors who try to reclaim their savings.