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Everybody is affected and confidence in the investment services community shaken.

December 17, 2008

Analysis of:Santander Falls After Disclosing $3 Billion Madoff Exposure | www.bloomberg.com

Big names in banking have large direct and indirect exposure to Bernard Madoff's fund. This will take liquidity out of the market for individual and small businesses that are seeking credit. The headlines do not make bankers look good (or competent) at a time when confidence in banks has been shaken worldwide. A lot of hedge funds are based in friendly jurisdictions; in Europe, their clients - mostly high net worth individuals - are classified as 'professional' so they are entitled to less protection than the average retail investor. Madoff's Ponzi scheme (not too difficult to identify if you are looking), could be the tipping point that will lead to regulate hedge fund irrespective of the jurisdiction where they are set up, a rush of clients asking to be 'downgraded' to retail clients and stricter rules regarding 'competence' checks on clients before classifying them as 'professional'.Investment guidelines for local government treasurers might be reviewed.

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