Funds Hub

Money managers under the microscope

Free from fraud? Get the certificate

June 1, 2009

Hedge funds wishing to demonstrate their honesty to a sceptical world can now pay for a risk assessment to show they have a low risk of fraud.

rtr23yfeFor $15,000-$20,000 Protean Fraud Risk Appraisal will use its database of every such financial crime since 1997 to see if a fund shows any suspicious characteristics.

“We’ve evaluated every single fraud and worked out the common areas where fraud has arisen,” partner Nathan Sewell tells me.

While Sewell stresses there are no guarantees against such crimes, which are often committed by an individual or small group and can be very hard to spot, the certificate is designed to show a fund has ‘a low fraud risk’.

The process, which also draws on experts from the insurance world, would have highlighted problems at the major hedge fund frauds of recent years, he claims, although he adds that it is unlikely that these funds would have called in Protean in the first place.

“Even the fact that the manager is willing to open their doors speaks volumes,” he says. “Whereas Madoff wouldn’t even open his doors to anyone.”

(See also Fraud – a booming business and Spotting Madoff)


Paying someone to say you’re a low risk for fraud? That arrangement is just begging for corruption.


Sounds a bit fishy!
Mind you I might be able to make a small fortune selling Protaen Fraud Risk Appraisal certificates on eBay for $1,500-$2,000.

Posted by Peter H | Report as abusive

This sounds like it may be a positive move towards filtering out the hedge fund cowboys that have blighted the reputation of hedge fund industry.

Posted by Justin | Report as abusive

We already have SEC, NASD, FDIC, FHA, S&P, Moodies etc they make sure that financial companies and banks act honestly and meet highest ethic standards.
They have worked perfect for decades sniffing out misconduct!

Well with exception to 100′s cases when they failed.
One more body sound like a joke.

We don’t need another joke, we a law that specifically makes executive personally liable for corp misconduct. Today corporate law is all about shielding individuals (executives) from any responsibilities while penalizing companies (shareholders).

Posted by Serey | Report as abusive

It’s a backdoor legalization of fraudulent hedge funds.

As far as I can tell, NO, it’s not a crime committed by a single individual or small group. It’s a crime committed by large organizations.

Posted by Don | Report as abusive

I was expecting AIMA to come up with an official certification process instead…

Posted by Julia | Report as abusive

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