I would like to highlight a few lessons learned from our experience in investigating control breaches in these mutual fund cases. One of the most obvious is the need to critically evaluate unusual client relationships that require variances from standard procedures. If a high percentage of compensation is derived from a single client, a red flag should immediately go up.
The current situation is ideally suited for this instrument since the capital is being raised for an extreme tail event (losses on highly rated sovereign debt) – the public nature of which would involve no risk of regulatory forbearance. The second line of defence involves co-operative measures to provide foreign currency liquidity.