Margin of Safety » Custody Law http://amarginofsafety.com "...to distill the secret of sound investment into three words..." Fri, 26 Jun 2020 18:44:00 +0000 en hourly 1 http://wordpress.org/?v=3.2 How Safe are the Assets that You Trusted to Your Custodian? Jason Zweig http://amarginofsafety.com/2013/03/18/how-safe-are-the-assets-that-you-trusted-to-your-custodian-jason-zweig/?utm_source=rss&utm_medium=rss&utm_campaign=how-safe-are-the-assets-that-you-trusted-to-your-custodian-jason-zweig http://amarginofsafety.com/2013/03/18/how-safe-are-the-assets-that-you-trusted-to-your-custodian-jason-zweig/#comments Mon, 18 Mar 2013 15:09:01 +0000 Ray Galkowski, CFA http://amarginofsafety.com/?p=1528 Continue reading →]]> I am a risk manager and credit analyst by training (actually, I think I was born that way), so when I created my hedge fund over three years ago, one of the first questions I asked the partner of (large, well-respected hedge fund) law firm who drafted my fund’s foundational documents was: “What happens if (very large, well-respected, money center bank) goes under? What assurances do I have that my investors will be able to get their money back?”

I cannot say that it was the first time that this law partner heard that question, but I know his answer was not a canned speech; he thought about it for some time, but his conclusion was that in most cases the law is on account holders’ side. Honestly, I expected him to point me to a specific and unambiguous statute that protected the account holders’ assets, so I was a little surprised by his answer. However, he did walk me through the recent instance when investors were not protected: Lehman Brothers’ British account holders.

Jason Zweig asks the same question in this week’s Intelligent Investor column and learns that it has not been a problem in over 400 bank failures.

http://online.wsj.com/article/SB10001424127887324392804578362391140337804.html?KEYWORDS=Intelligent+Investor

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