Attention Financial Advisors: Are YOU Affected by the Ghost of Madoff?
As a financial advisor, chances are you have an E&O (Errors & Omissions) insurance policy designed to protect you against claims of malpractice.
Based on this, you believe you can sleep well at night.
Sorry, but it may be time to rethink that and come out of your comfort zone.
Why?
Bernie Madoff.
The viral spread of the greatest Ponzi scheme in history is now threatening many financial advisors. The reason may be buried in the fine print of your insurance policies, which may suddenly be carrying Madoff clauses.
You may not see it unless you read the fine print, but these clauses can provide your insurance carrier with an escape hatch in the event you are sued. Although the policies and the Madoff clauses vary by carrier, even though you never had any direct connection with the infamous Ponzi schemer, your policy may fail you when you need it most.
Assume, for example, you did business with a Madoff feeder fund. If a client lost money and sues you, your insurance may turn out to not be worth the page it’s printed on. Every policy now must be read by an expert who knows where the blind spots and the time bombs are – and how to identify and address them.
Madoff Clause:
This policy, its endorsements and/or coverage extensions shall not apply to loss resulting directly or indirectly, from any form of investment by any person or entity who is insured, or is a Joint Insured under this policy, in any security, group of securities, mutual, hedge or other form of an investment fund sponsored or promoted by Bernard L. Madoff, Madoff Investment Securities, or any entity controlled by or affiliated with Bernard Madoff or with Madoff Investment Securities, including, but not limited to any of these entities or this person who is now, or may become the subject of any USA Securities and Exchange Commission investigation or any other investigation by a USA local, state, or federal authority, or any such similar authority duly constituted in any country outside the United States of America.
