17 comments on “Nicola Horlick

  1. Criminal charges are a stretch – but she sure as hell better start lawyering up because she will be sued by her investors and it’s kind of tough to see where her defence is going to come from. That “failure of regulation” schtick isn’t going to cut much ice in Chancery.

  2. If not, then at the very least she totally neglected basic fiduciary responsibilities towards her clients. Come to that, a lot of banks, fund managers and so on are in the same boat.

  3. Made-off managed to fool many, including the US regulators, RBS, HSBC and Santander. Not sure it should be a crime to fall for a fraudster. If Bramdean hasn’t done (however incompetently) what it said it would be a very different matter.

    Like a lot of things these days, I think the term ‘due diligence’ no longer means what it used to and should. Particularly in business and politics the words people use never seem to carry the weight they ought to. Eager to say the right things without really meaning it.

  4. I have read that there were other brokers who wouldn’t have anything to do with him, because they reckoned whatever he was doing could not explain the returns he was touting. So it seems that at least some of them had a good idea that it could not last, and that something was very wrong. By his own admission, this has been going on for years.

    I think her investors would have a case, because she purported to find stuff out. And if she had tried, she would at least have learned to back off and look elsewhere. It appears to me that she failed to even try to do, what she promised to do. There was a bandwagon going by and she threw her clients’ money onto it.

  5. Why would the investors endanger the value of their investments with Horlick by suing Horlick? Are they idiots?

    Additionally, the value of the loss in Madoff was tiny in comparison to the value of the fund. Should Horlick be sued if Madoff had simply gone bankrupt due to market failure?

    You could argue that Horlick had failed to properly assess the level of risk, but that’s a long way from criminal responsibility. All Horlick would have to do is remind investors of the boilerplate fine print – “The value of your investment can go down as well as up. All investments carry a level of risk and your investment strategy should reflect that financial reality blah blah blah”

    In any putative criminal case, the prosecution (the investors) would not simply have to prove negligence, but criminal and reckless negligence. They would have to demonstrate that Horlick knew the risks was something other than what she represented to her investors.

    So the answer is: not a hope in hell, Tim

    If the investors are aggrieved, they can go somewhere else. Its a free market after all.

  6. “You could argue that Horlick had failed to properly assess the level of risk, but that’s a long way from criminal responsibility. ”

    Not when you have sold yourself to the public, as an assessor of fiscal probity, which is what she did. She set herself up as being safe and secure, because of her committment to scrutiny of the investments. Now she ought to be made to demonstrate her degree of scrutiny of the investments, shouldn’t she?
    After all, that is all she was, someone who traded on what she knew, who she knew, and when she knew it.
    What is it called when you take money from people, with a promise of returns, under false pretences? Grand larceny isn’t it?

  7. “What is it called when you take money from people, with a promise of returns, under false pretences? Grand larceny isn’t it?”

    That would be Madoff.

    All Horlick would have to do is point out that NO-ONE, not the SEC, not the FSA, nor the auditors nor any serious accountancy firm had raised any concerns about Madoff. So Horlick would simply point out the blindingly obvious – there’s no such thing as a risk-free investment and that investors are warned of that fact.

    “Not when you have sold yourself to the public, as an assessor of fiscal probity, which is what she did. She set herself up as being safe and secure, because of her committment to scrutiny of the investments. Now she ought to be made to demonstrate her degree of scrutiny of the investments, shouldn’t she?”

    Then the investors should remove their investments from the Horlick fund if they do not trust Horlick to manage the risk. But Horlick does not guarantee an absence of risk because such a state does not exist anywhere in the financial system.

    As I pointed out, the investors would have to demostrate that Horlick was criminally reckless or had some secret knowledge about the true state of Madoff that had eluded everyone else, and yet failed to pass on that information to investors or act accordingly.

    The investors could sue, but all they’d do is devalue the investments that they’d made and expose themselves to ridicule from Horlick’s lawyers asking them where they fell down in assessing Horlick’s credibility in handling their money – shouldn’t they have known better?

    So the answer is still: not a hope in hell

  8. Lot of nonsense being talked above.

    Horlick (or at least the generalpartner/investment manager she controls) is almost certainly a fiducary to the Bramdean investors. She can’t claim to be under an equivalent obligation to the SEC or FSA – she operates to a much higher standard. In any case, the whole point is that the FSA/SEC do not regulate hedge funds to any significant degree – that’s why they are only for big boy investors.

    There will be plenty of investors knocking on her door – most will just be looking for a settlement (from all that lovely carry) but I suspect a few will take it all the way (those whose exposure to Madoff exceeds their continuing interest in Bramdean or just the plain pissed (c.f Hollinger ) ).

  9. What is it called when you take money from people, with a promise of returns, under false pretences? Grand larceny isn’t it?

    I thought it was called “Government”…

  10. “All Horlick would have to do is point out that NO-ONE, not the SEC, not the FSA, nor the auditors nor any serious accountancy firm had raised any concerns about Madoff” that wll prove somewhat difficult, given that THIS GUY submitted a 20 page document to the SEC detailing exactly how and hy Madoff was a Ponzi schme 3 years ago. Go read it. It’s about as big a smoking gun as you can get http://online.wsj.com/documents/Madoff_SECdocs_20081217.pdf

  11. Bramdean claims to have completed stringent due diligence on every fund in which it invests.

    That being the case, it will be interesting to see the report prepared on Madoff Securities before taking the decision to invest 10% of its total investment pot with Madoff, and any subsequent investigations made by Bramdean.

    Hopefully it will address a number of puzzling questions, not least how Madoff’s claimed trading volumes continually managed to exceed the total number of trades in specific markets over the same timeframe, without the likes of Bramdean realising the impossibility of his claims and – perhaps – beginning to wonder whether anything else Madoff was claiming was equally impossible.

    I admire Horlick’s habitual chutzpah in pointing the finger anywhere but Bramdean, but the sad fact is her firm cannot have performed any due diligence worthy of the name – along with any number of regulators, bankers and hedge funds who really should have known better.

    Bring on Messrs Sue, Grabbit & Runne.

  12. If the report to the SEC is genuine, then the SEC were warned in November 2005 that Madoff was operating a Ponzi scam.

    Interesting that Madoff was acting as an agent for third-party FoFs to “private-label” hedge funds…….which would make Santander, Bramdean, etc., principals.

    Current law of agency would suggest that Ms. Horlick is very firmly on this particular hook.

  13. Interesting Horlick comments.
    Sadly it seens improbable that criminal charges would stick.
    Surely tho’ she has been guilty of gross negligence. She is paid a fee to do inter alia due diligence on her investments. Investing in a fund wit a one man and dog auditor for $50bn is about as negligent , incompetent and generaslly useless as onecan get.
    DESTROY this smug failures reputation now

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