News & Resources


Crain’s article, “Cracking Down on Future Madoffs,” features T&M’s new Investor Protection Program

July 01, 2009

“Call it a Bernie Madoff prevention program,” the article in the June 29-July 12 issue of Crain’s New York Business begins, citing T&M’s new Investor Protection Program. Headed by a former NYC special narcotics prosecutor and staffed by former CIA and FBI agents and financial services veterans, as opposed to accountants, T&M’s Investor Protection Program (IPP) is a comprehensive, independent due diligence program designed to verify the reliability or vulnerability of hedge funds and other alternative investments. In addition to the investment vehicles themselves using the IPP to assure their customers of their fund’s integrity, the program is also of value to foundations and arts and educational institutions whose endowments have been ravaged by risky investments and Ponzi schemes, and whose managers need to reassure donors of the soundness of their investment strategies.

T&M’s Chairman, Robert S. Tucker, is quoted in the Crain’s article: “These firms [private equity and hedge funds] understand that it’s a scary world out there and that if they want the big institutional investors they’re going to have to do things they never had to do before.”

Investor Protection Program


In these uncertain times, financial competence, honesty and integrity are on the minds of investors the world over. Never before have due diligence and responsible risk management been more critical to protecting investors from losses due to fraud or operational and risk management vulnerabilities. Pension Funds, Endowments, Family Offices and Not-for-Profit Organizations, which have relied on investment advisors, audited financial statements, independent administrators and custodians, have experienced significant and, at times, devastating losses from hedge funds.

The lesson is clear – the discovery of operational and fraud risks in hedge funds requires much more than financial acumen. Investors need a new and higher standard of third party due diligence that can only come from the expertise brought by a team of highly skilled independent investigators.

T&M Protection Resources, through its FIA division (Forensic Investigative Associates), has created a unique Investor Protection Program to guard investor interests throughout the investment cycle – from the initial investment evaluation to the exit. To carry out the program FIA has assembled a multidisciplinary team, including former senior CIA, FBI and Secret Service agents, prosecutors and financial services executives, which is expert in detecting the risk embedded in complex financial instruments and derivatives.

This team, which brings the outsider’s ability to question assumptions, has the extensive, firsthand knowledge of back office operations and processes that enables it to conduct meticulous background and operational due diligence. Moreover, these diverse professionals come from cultures that demand independence, integrity, and rigorous analysis, qualities crucial to an objective understanding of operational risk.

The Investor Protection Program provides investors with extensive background reports on key individuals and entities and a diagnostic report, which can be updated periodically through an ongoing oversight arrangement, on the adequacy and integrity of the fund’s continuing execution process. The Investor Protection Program is designed to provide comprehensive investment due diligence that will enable investors to make informed risk management decisions.

The Challenge:

  • Guard against investment fraud and mismanagement
  • Confirm the integrity of management and employee backgrounds
  • Verify the authenticity of records and the existence of assets
  • Evaluate the adequacy of and adherence to risk management protocols
  • Test the strength of the control environment
  • Identify conflicts of interest in third party arrangements
  • Detect changes in operational behavior or investment style that would be adverse to investor interests

Benefits of T&M:

The Investor Protection Program takes an integrated, multidisciplinary approach to due
diligence, utilizing a diverse team of highly skilled professionals to carefully scrutinize hedge
funds for irregularities or operational weaknesses through the following methods:

Background Checks

  • The team will conduct in-depth background investigations of the key individuals and
    third party service providers

Diagnostic Analysis, Evaluation and Testing

  • Analyze financial statements, fund documents, policies & procedures
  • Interview executive and operations staff
  • Walk through each step of the investment process
  • Assess the control environment, risk management protocols and systems, and perform tests of compliance, back-tests and reconciliations
  • Verify assets with third parties, review valuation methodology and consistency of NAV
  • Examine information and physical security and business continuity plans
  • Review third party arrangements, side pockets and side letters

Ongoing Oversight

  • Make scheduled and random inspections of fund operations to detect changes in risk
    over time
  • Attend important periodic meetings
  • Analyze committee minutes and other documents such as exception reports
  • Review changes in service agreements
  • Evaluate compliance
  • Search for undisclosed information


Robert H. Silbering

Senior VP of Investigations
President of the FIA Division
Office: 212.661.7510