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Investment Scheme. Presentation developed to show how a bank should not be held liable for investment decisions made by trust account holders. Click to advance slides. State Bank was not involved in investment advice and/or decisions. - PowerPoint PPT Presentation
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Investment SchemeInvestment Scheme
Presentation developed to show how a bank should not be held liable for investment decisions made by trust account holders.
Click to advance slides.
www.executivepresentations.com
State Bank was not involved State Bank was not involved in investment advice and/or in investment advice and/or
decisionsdecisions
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State Bank held “directed custodial trust” State Bank held “directed custodial trust” accounts for the Investment Group...accounts for the Investment Group...
Investors approached Smith and signed documents giving Smith complete control
Investors • Choose to invest in
Investment Group• Designated Smith
as General Partner
Investors
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State Bank • Must follow direction of
investors • Provides services for a fee,
does not profit based on performance
• No audit rights
State Bank held “directed custodial trust” State Bank held “directed custodial trust” accounts for the Investment Group...accounts for the Investment Group...
...State Bank is involved solely because of type of funds (IRAs, etc.)
Investors • Choose to invest in
Investment Group• Designated Smith
as General Partner
$$$
State BankInvestors
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State Bank • Must follow direction of
investors • Provides services for a fee,
does not profit based on performance
• No audit rights
State Bank held “directed custodial trust” State Bank held “directed custodial trust” accounts for the Investment Group...accounts for the Investment Group...
...State Bank is involved solely because of type of funds (IRAs, etc.)
Investors • Choose to invest in
Investment Group• Designated Smith
as General Partner
$$$$$$
Investment GroupState BankInvestors
DirectionFrom
Investors
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Bob Smith • Squanders $$$ as he sees
fit and conceals fraud from everyone
State Bank held “directed custodial trust” State Bank held “directed custodial trust” accounts for the Investment Group...accounts for the Investment Group...
...State Bank gave NO advice or direction as to how the money was invested
$$$
DirectionFrom
Investors
State Bank • Must follow direction of
investors• Provides services for a fee,
does not profit based on performance
• No audit rights
Investors • Choose to invest in
Investment Group• Designated Smith
as General Partner
Smith
Investment GroupState BankInvestors
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Who are the Plaintiffs?Who are the Plaintiffs?
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Who are the Plaintiffs?Who are the Plaintiffs?
• Wealthy individuals who are sophisticated, knowledgeable investors who presumably know how to properly research investments
• Business associates and friends of Smith
Promises of extremely high investment returns led them to willingly take risks
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Who are the Plaintiffs?Who are the Plaintiffs?
• Wealthy individuals who are sophisticated, knowledgeable investors who presumably know how to properly research investments
• Business associates and friends of Smith
• Students of Smith’s Investment Theory Classes
Promises of extremely high investment returns led them to willingly take risks
Blind belief in Smith and his authority position led to faulty judgment
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Who are the Plaintiffs?Who are the Plaintiffs?
• Wealthy individuals who are sophisticated, knowledgeable investors who presumably know how to properly research investments
• Business associates and friends of Smith
• Students of Smith’s Investment Theory Classes
...The Plaintiffs made their investment decisions for personal reasons, having NOTHING to do with State Bank
Promises of extremely high investment returns led them to willingly take risks
Blind belief in Smith and his authority position led to faulty judgment
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How did Plaintiffs make their How did Plaintiffs make their investment decisions?investment decisions?
For whatever reason, the plaintiffs did not follow typical investment practices, and instead blindly followed Bob Smith...
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Did the Plantiffs...Did the Plantiffs...
• Thoroughly research companies/entities NO
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NO
Did the Plantiffs...Did the Plantiffs...
• Thoroughly research companies/entities
• Perform Due Diligence regarding personwho is making investments N
O
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NO
Did the Plantiffs...Did the Plantiffs...
• Thoroughly research companies/entities
• Perform Due Diligence regarding person who is making investments
• Consider investment strategy — carefully calculating risk and realistic returns
NO
NO
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...The Plaintiffs willingly took an enormous and irresponsible risk and are unwilling to accept their own responsibility in the scheme
NO
Did the Plantiffs...Did the Plantiffs...
• Thoroughly research companies/entities
• Perform Due Diligence regarding personwho is making investments
• Consider investment strategy — carefully calculating risk and realistic returns
NO
NO
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Who Should Bear the Loss?Who Should Bear the Loss?
Irresponsible investors who willingly accepted the risk that Smith would “lose all the money” or trust companies that were providing a legitimate service?
...The Plaintiffs should bear the loss