RE: [RT] PRIME BROKER AND FRAUD

["Jacobson, Alex" <AJacobson@xxxxxxxxxxxxxx>]

First 
of Prime Brokerage by definition means custody is done somewhere else.  A 
true Prime Broker would not hold any positions and would be a direct access 
exchange member.  A Prime Broker also would not, regrettably, provide any 
client info as they custody nothing.  You would want to make certain the 
broker with custody is kosher.  The Prime could trade badly and lose money, 
but they custody nothing.  The custodial broker could have some 
responsibility in a theft or fraud.

  <FONT face=Tahoma 
  size=2>-----Original Message-----From: Charles Meyer 
  [mailto:chaze@xxxxxxxx]Sent: Wednesday, February 04, 2004 8:07 
  AMTo: REAL TRADERSSubject: [RT] PRIME BROKER AND 
  FRAUD
  Group-
   
  Can anyone shed light on this 
  issue?  These questions come from an 
  ananomous man who purportedly lost some money thru a <FONT face=Arial 
  size=2>hedge fund fraud.  The problem is that I don't understand the 
  nature of the questions and how they relate to the way the <FONT 
  face=Arial size=2>money was stolen?  Can anyone tell me how they 
  stole his money and the Prime Broker link?  <FONT face=Arial 
  size=2>I can only get info
  in bits and pieces and my correspondent is 
  often lazy with providing me information.  
   
  Thanks for your time, attention, and any 
  feedback.
  <FONT face=Arial 
size=2> 
  chas
  ====
  
   
  
  Hedge Fund Prime Brokerage Due 
  Diligence
   
  1)  Are you currently or have you ever been 
  a Prime Broker for xxxxx?
   
  2)  Does your arrangement provide for 
  exclusitivity in any way or is xxxxx free to pursue additional Prime 
  Brokerage arrangements in addition to yours?  
       Can you provide 
  details in any way? 
  <FONT face=Arial 
size=2> 
  2)  If you are no longer a Prime for xxxxx, 
  can you tell me the circumstances as to why this is no longer 
  true?
   
  Under your Prime arrangement (current or past, 
  please note) the following questions;
   
  3)  Are all assets, including cash, held in 
  your custody?
   
  4)  Explain how fund assets may be moved and 
  invested.
   
  5)  What are your policies and procedures to 
  safeguard fund assets (3rd party signatures, multiple signatures, 
  etc.)?
   
  6)  Does xxxxx have multiple accounts 
  with you?  If so, how do you assure that all accounts are traded on an 
  equal basis?
   
  7)  Do you perform any type of valuation 
  services (such as calculation of NAV, account balances, etc.)?
   
  8)  In addition to the above, can you please 
  describe any other duties and responsibilities that your arrangement 
  with xxxxx entails?
   
  9)  Is there anything else that you can tell 
  me that would help me better understand the relationship that you have 
  with xxxxx and / or the Fund Manager?
  
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