Forbes tells about reckless QI....

Another Intermediary takes off with the money

As many of you know, we are constantly harping on the importance of keeping clients' funds in segregated accounts. Now, in the April 23 edition of Forbes Magazine, there's a yet another example of what we've been talking about.

According to the Forbes article, Don McGhan was looking for a large source of money to fund a breast implant company. He found it by buying three intermediaries and using the commingled funds (apparently about $95M worth). McGhan lived large for a while. That is, until deposits fell to a point where clients needed money for the purchase of their new property and the money wasn't available. In all, 130 clients lost the funds from the property they'd sold. Amounts ranged from $25,000 to $22 million each. This far outstripped the bond that he'd taken out.

Remember, there are no rules regulating what intermediaries can do with client deposits. Only a few intermediaries keep segregated accounts, and some of the commingling QIs invest in risky things such as foreign derivatives.

Ask your intermediary if they keep segregated accounts. If they say they do, tell them you want to be able to see your exchange funds in the bank account online. Remember, it's your money and no government agency is protecting you!

--The Experts

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