August 15 2007

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Global Choice PPT DRAFT

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  • Introduction page
  • August 15 2007

    1. 1. Intro GLOBAL CHOICE FUNDS, LLC Offering High-Yield returns Principal Protection Optimal Risk-Resistance Liquidity Welcome to Working with Swiss Finance Corporation Regulated & Audited by the UK’s Financial Service Authority (FSA) & Bank of England London, San Clemente and San Diego Swiss Finance Corporation (SFC) www.sfc-uk.com Global Choice Funds (GCF) www.globalchoicefunds.com
    2. 2. Intro <ul><li>The investor places funds into the Global Choice Funds, LLC. The LLC creates a joint bank account placing funds in AAA, government-backed zero coupon bond. The investment is protected through this asset which is investor-controlled. </li></ul><ul><li>Interest on the bond is paid by the bank, up front, and this interest is invested through the the Global Choice Funds LLC. A margin account is created for the benefit of the client with no liability. No liability means no margin call liability and no cost for the margin. The margined interest is placed with 10 selected elite managing traders. In conjunction with the elite managing/traders, as the trades are being made by the managers the fund and its volatility is 100% controlled by Swiss Finance Corporation (SFC) . </li></ul><ul><li>Investors realize a minimum 15% rate of return on the total amount of funds under management (which is the principal placed at the bank). The minimum 15% rate of return goes to the benefit of the client before Swiss Finance or Global Choice Funds receive any transaction fees or profit. </li></ul>Executive Summary of Program Basics Created through a long standing relationship with the broker Swiss Finance Corporation, Global Choice Funds allows participants access to currency managers/traders normally not available to the public. The unique partnership enables high-yield returns, liquidity, principal protection and optimal risk-protection. Working with Swiss Finance Corporation GLOBAL CHOICE FUNDS
    3. 3. Program home page Program Returns Cash Flow Risk/ Regulation Principals Unique Features Definitions Fees GLOBAL CHOICE FUNDS
    4. 4. Program overview stand alone Bond Interest Invested with The Global Choice Funds/SFC High-Yield Managed Program Regulated & Audited by the UK’s Financial Service Authority (FSA) & Bank of England London, San Clemente, San Diego - Risk/Return level customized to meet the investors objectives - Total investment return 15% plus - 15% Performance floor is asset backed (Bonds plus transaction fees)‏ - Diversified between 10 Internationally Recognized Money Managers with Track Records Averaging 19.89% over the last 5 years - SFC has control of the volatility of the trades 24/7 (1.42 std per month) - Bond purchased is held by the Global Choice Funds, LLC in a joint account controlled by the investor. Base Investment held in AAA-Rated Government-backed Bond providing full protection of principal . Home GLOBAL CHOICE FUNDS Swiss Finance Corporation (SFC) www.sfc-uk.com Global Choice Funds (GCF) www.globalchoicefunds.com
    5. 5. The Program: Collateralization and leverage <ul><li>A Risk-Resistant, Government-Backed, Principal-Protected, Registered and Regulated, High-Yield Managed Funds Program </li></ul><ul><li>Collateralization : Two levels provided: </li></ul><ul><li>(1) Collateral in the form of a government-backed AAA bank </li></ul><ul><li>instrument </li></ul><ul><li>(2) Transaction fees (fees usually paid to the broker/dealer when a </li></ul><ul><li>trade is made) go towards the benefit of the client’s account until the </li></ul><ul><li>client has made its minimum targeted rate of return </li></ul><ul><li>Leverage (margin) : Funds are borrowed by the LLC from Swiss Finance, </li></ul><ul><li>the broker/dealer, at no cost, (a 6% savings for investor) to increase the </li></ul><ul><li>trading size at multiples of 1 to 7 times the clients interest investment, to be </li></ul><ul><li>held at Swiss Finance, producing optimal returns with minimal changes in </li></ul><ul><li>overall risk to interest. </li></ul><ul><li>• Risk/Return Customization: Additional upside return potential in excess of </li></ul><ul><li>15% can be customized to meet the specific risk parameters of the client. </li></ul><ul><li>• Regulation and Registration: Swiss Finance Corporation is a broker that is </li></ul><ul><li>registered and regulated in the UK with the Financial Services Authority </li></ul><ul><li>(FSA) http://www. moneymadeclear . fsa . gov . uk Registration number 142903. </li></ul>Program Details Home
    6. 6. Home Returns Returns Program Cash Flow Risk/ Regulation Principals Unique Features Definitions Fees GLOBAL CHOICE FUNDS
    7. 7. Returns While the principal is protected at the bank, the margined interest provides a minimum 15% return on that protected principal. The client incurs no cost for margin and no liability for margin. Plus the client has the benefit of knowing that Swiss Finance controls the trading of the money and the money managers transactions, that results in low volatility and provides the use of transaction fees towards the benefit of the client’s account. 2002: 14.47% 2003: 20.38% 2004: 14.61% 2005: 23.75% Actual 10 Manager Track Record 2002-2006 2006 RETURNS Home Monthly Standard Deviation (STD)‏ Annualized STD Risk Free Rate Average monthly net returns Annualized Net Returns Sharpe Ratio 1.42% 4.93% 3.50% 1.48% 19.89% 3.32
    8. 8. Home riskregs Returns Program Cash Flow Risk/ Regulation Principals Unique Features Definitions Fees GLOBAL CHOICE FUNDS
    9. 9. Risk/Regulation 2 OBJECTIVE : Manage risk through a Government Backed Principal-Protected, Registered and Regulated , High-Yield Managed Funds Program • Swiss Finance Corporation is a broker that is registered and regulated in the UK with the Financial Services Authority (FSA)‏ http://www. moneymadeclear . fsa . gov . uk Registration number 142903. Home <ul><li>The broker/dealer has the ability to stop a trade 24/7 that does not </li></ul><ul><li>meet the standard deviation criteria </li></ul><ul><li>The broker/dealer has the ability to replace any money manager based on </li></ul><ul><li>niche trading intelligence and current market trends </li></ul>RISK/REGULATION
    10. 10. Home fees Returns Program Cash Flow Risk/ Regulation Principals Unique Features Definitions Fees GLOBAL CHOICE FUNDS
    11. 11. Fees <ul><li>Transaction fees are paid to the broker/dealer after the client has made its </li></ul><ul><li>minimum target rate of return </li></ul><ul><li>There are no early-withdrawal fees (prepayment penalties)‏ </li></ul><ul><li>Investor funds are not subject to margin calls </li></ul><ul><li>Invertors do not incur margin expense </li></ul>Fees Home
    12. 12. Home cash flows Returns Program Cash Flow Risk/ Regulation Principals Unique Features Definitions Fees GLOBAL CHOICE FUNDS
    13. 13. Cash Flows How The Cash flows The interest is then margined 3-5 times with no liability to the client. $1M AAA zero-coupon bond is purchased at an A+ Bank where the principal investment will always stay. The Interest from the bond is advanced by the bank to invest through the Global Choice limited liability structure. The margined interest is diversified with 10 world recognized money managers. The Gains, including all transaction fees, flow to the benefit of the client’s account until the minimum targeted rate of return has been made (15%). Based on performance, SFC/GCF takes a % of profit AFTER the client realizes their gains. Example: $1,000,000 Home Start Here: Per request of the client, funds can be liquidated with no penalty. Global Choice Funds, LLC Swiss Finance Corporation Swiss Finance Corporation
    14. 14. Home definitions Returns Program Cash Flow Risk/ Regulation Principals Unique Features Definitions Fees GLOBAL CHOICE FUNDS
    15. 15. Definition index PRINCIPALS Index: • Alternative Asset • Bond Rating (AAA)‏ • Broker Dealer • Collateral • Commodity Trading Advisor - CTA • Diversification • Financial Services Authority (FSA)‏ • Hedge Fund • Interbank • Leverage • LIBOR - London Interbank Offered Rate • Liquidity • Managers of Managers - MOM • Margin Call • Market Maker • Price maker • Principal • Transaction Fees • Sharpe Ratio Home DEFINITIONS The definitions are found on Investopedia.com
    16. 16. Home unique features Returns Program Cash Flow Risk/ Regulation Principals Unique Features Definitions Fees GLOBAL CHOICE FUNDS
    17. 17. Unique features UNIQUE FEATURES <ul><li>Investors may contact existing long-term clients that have enjoyed similar benefits that are provided in in the Global Choice Program </li></ul><ul><li>Investors have access to interbank privileges not available to general public </li></ul><ul><li>Ability of SFC to control the activities of the involved managers (MOM) 24/7/365 </li></ul><ul><li>Liquidity, rarely offered in alternative asset/hedge fund investments </li></ul><ul><li>SFC activity is registered and regulated through the FSA (Financial Services Authority)‏ </li></ul><ul><li>The investor’s principal is secured with the AAA bond purchase </li></ul><ul><li>Fees charged to leverage trading accounts (6%) are covered by Global Choice Funds </li></ul><ul><li>There are no pre-payment penalties if funds are withdrawn </li></ul><ul><li>Invested funds are safe from margin calls </li></ul><ul><li>Clients and resources of the Global Choice Group of Companies are available to expand the capacity of your business and its agenda’s </li></ul>Home
    18. 18. Home principals Returns Program Cash Flow Risk/ Regulation Principals Unique Features Definitions Fees GLOBAL CHOICE FUNDS
    19. 19. Principals <ul><li>Swiss Finance Corporation (SFC) www.sfc-uk.com </li></ul><ul><li>SFC is an independent brokerage firm founded in 1988. It is a specialist </li></ul><ul><li>principal and price maker in the Global Foreign Exchange Market acting </li></ul><ul><li>as a market maker in &quot;interbank” foreign exchange and precious metals, </li></ul><ul><li>as well as a broker in futures. </li></ul><ul><li> - SFC (the broker) is regulated by the UK’s Financial </li></ul><ul><li> Services Authority (FSA). </li></ul><ul><li> - SFC (the broker) has long-standing relationships </li></ul><ul><li> with Asset Managers, Corporates, CTAs , Hedge Fund </li></ul><ul><li> Financial Institutions and Global Banks. </li></ul><ul><li>From the head office in Central London, SFC has built an </li></ul><ul><li>International reputation, with representatives in place in key </li></ul><ul><li>locations throughout the world. Today, professional investors </li></ul><ul><li>and institutions profit from SFC’s truly global access to the </li></ul><ul><li>foreign exchange market. </li></ul>PRINCIPALS Home
    20. 20. Principals <ul><li>Swiss Finance Corporation (SFC) continued… www.sfc-uk.com </li></ul><ul><li>SFC not only strives to understand fully the market and </li></ul><ul><li>its trends but also those of its customers. By carefully discussing </li></ul><ul><li>and analyzing client needs, trading habits, and expectations, </li></ul><ul><li>SFC is able to fully customize their Foreign Exchange </li></ul><ul><li>trading strategies. </li></ul>PRINCIPALS Home
    21. 21. Principals pacstar <ul><li>Global Choice Funds: www. globalchoicefunds .com </li></ul><ul><li>The founder of Global Choice has provided a 15 year track record of fulfilling the </li></ul><ul><li>following benefits: </li></ul><ul><li>protect the clients initial investment principal </li></ul><ul><li>take as much risk, if not more, than the client does on how their money is invested </li></ul><ul><li>pay the client first before taking transaction fees and/or profit </li></ul><ul><li>provide liquidity </li></ul><ul><li>monthly statements </li></ul><ul><li>the ability to contact current, long-term client’s for references their accounts </li></ul><ul><li>a consistent, non-volatile, annual rate of return of 15% or greater </li></ul>PRINCIPALS Home
    22. 22. Home’ For Qualified, Accredited Investors requiring more information Please Contact: John A. Miller (Principal) 310.748.0605 [email_address] GLOBAL CHOICE FUNDS
    23. 23. Sharpe Ratio Calculation Disclaimer……. This presentation does not constitute an offer to sell, or a solicitation of an offer to buy or sell, any securities or interests, and is intended for informational purposes only. Any offer can only be made by a Confidential Information Memorandum, only in jurisdictions in which such an offer would be lawful and only to individuals who meet specific investor suitability requirements. Global Choice Fund, LLC, and its affiliates, do not make any representations as to the accuracy or completeness of any information contained herein and such information should not be relied upon as such. Information contained herein is subject to change at any time without notice. GLOBAL CHOICE FUNDS
    24. 24. Def Alt asset Alternative Asset A term referring to any non-traditional asset with potential economic value that would not be found in a standard investment portfolio. Due to the unconventional nature of some of these investment assets,  valuation may be a problem.   For most people, examples of alternative assets would include art and antiques, precious metals, fine wines, rare stamps and coins, and other collectibles such as sports cards. However, to the very wealthy, hedge funds, venture capital-related projects and infrastructure could be alternative assets. In either case, alternative assets tend to be less liquid than traditional investments. Thus, investors who favor alternative assets will have to consider a very long investment horizon*.  DEFINITIONS * Not the case for Global Choice Fund investors. Funds are liquid. Index The definitions are found on Investopedia.com
    25. 25. Def bond Bond Rating A grade given to bonds that indicates their credit quality. Private independent rating services such as Standard & Poor's, Moody's and Fitch provide these evaluations of a bond issuer's financial strength, or its the ability to pay a bond's principal and interest in a timely fashion.   Bond ratings are expressed as letters ranging from 'AAA', which is the highest grade, to 'C' (&quot;Junk&quot;), which is the lowest grade. Different rating services use the same letter grades, but use various combinations of upper- and lower-case letters to differentiate themselves. To illustrate the bond ratings and their meaning, we'll use the Standard & Poor's format: AAA and AA:  High credit-quality investment grade AA and BBB:  Medium credit-quality investment grade BB, B, CCC, CC, C: Low credit-quality (non-investment grade), or &quot;junk bonds&quot;   D:  Bonds in default for non-payment of principal and/or interest AAA The highest rating given on bonds by bond rating agencies. AAA bonds are thought to have virtually no risk of default. Moody's and Standard & Poor's are the most widely used rating agencies. DEFINITIONS Index The definitions are found on Investopedia.com
    26. 26. Def broker dealer Broker-Dealer A person or firm in the business of buying and selling securities operating as both a broker and a dealer depending on the transaction.   Technically, a broker is only an agent who executes orders on behalf of clients, whereas a dealer acts as a principal and trades for his or her own account. Because most brokerages act as both brokers and principals, the term broker-dealer is commonly used to describe them. DEFINITIONS Index The definitions are found on Investopedia.com
    27. 27. Def broker dealer slide 10 Broker-Dealer A person or firm in the business of buying and selling securities operating as both a broker and a dealer depending on the transaction.   Technically, a broker is only an agent who executes orders on behalf of clients, whereas a dealer acts as a principal and trades for his or her own account. Because most brokerages act as both brokers and principals, the term broker-dealer is commonly used to describe them. DEFINITIONS Back The definitions are found on Investopedia.com
    28. 28. Def collateral Collateral Properties or assets* that are offered to secure a loan or other credit. Collateral becomes subject to seizure on default.   Collateral is a form of security to the lender in case the borrower fails to pay back the loan. For example, if you get a mortgage, your collateral would be your house. In margin trading, the securities in your account act as collateral in the case of a margin call.** DEFINITIONS * The AAA government-backed bond acts as the Global Choice collateral **Any “ margin call ” that might occur in the Global Choice Program is covered Index The definitions are found on Investopedia.com
    29. 29. Def CTA Commodity Trading Advisor - CTA An individual or a firm, registered with the Commodity Futures Trading Commission, that receives compensation for giving people advice on options, futures and the actual trading of managed futures accounts. Registration for CTAs is done through the National Futures Association, a self-regulated organization responsible for reviewing and accepting registrations.   Registration for CTAs is required under the Commodity Exchange Act, which was passed in 1936 to better oversee the futures and options markets. Registration is required for any individual or firm profiting from the advice they give, unless they have not provided more than 15 persons with advice over the last year and they do not advertise themselves as a CTA. There is also no required registration if the individual or firm is a registered investment advisor with the SEC and only provides options and futures advice incidentally. DEFINITIONS Index The definitions are found on Investopedia.com
    30. 30. Def Diversification Diversification A risk-management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.   Studies and mathematical models have shown that maintaining a well-diversified portfolio of 25 to 30 stocks will yield the most cost-effective amount of risk reduction. Investing in more securities will still yield further diversification benefits, albeit at a drastically smaller rate. Further diversification benefits can be gained by investing in foreign securities because they tend be less closely correlated to domestic investments. For example, an economic downturn in the U.S. economy may not affect Japan's economy in the same way. Therefore, having Japanese investments would allow an investor to have a small cushion of protection against losses due to an American economic downturn. Most non-institutional investors have a limited investment budget, and may find it difficult to create an adequately diversified portfolio. This fact alone can explain why mutual funds have been increasing in popularity. Buying shares in a mutual fund can provide investors with an inexpensive source of diversification. DEFINITIONS Index The definitions are found on Investopedia.com
    31. 31. Def fsa Financial Services Authority (FSA)‏ The FSA regulates the activities of Swiss Finance Corporation and other registered entities in the UK. There is a defined co-operation between HM Treasury (the ‘Treasury’), the Bank of England (the ‘Bank’) and the Financial Services Authority (the FSA) in the field of financial stability. The FSA advises on the regulatory implications for authorized firms and Recognized Bodies of developments in domestic and international markets and of initiatives, both domestic and international. There are 10 pages following this definition that detail the duties of the FSA and partner regulating agencies. It is crucial to understand the distinction between regulated and unregulated entities in the world of currency trading. DEFINITIONS Index The definitions are found on Investopedia.com
    32. 32. Def fsa 2 Financial Services Authority (FSA). Memorandum of Understanding between HM Treasury, the Bank of England and the Financial Services Authority 1. This memorandum of understanding establishes a framework for co-operation between HM Treasury (the ‘Treasury’), the Bank of England (the ‘Bank’) and the Financial Services Authority (the FSA) in the field of financial stability. It sets out the role of each authority, and explains how they work together towards the common objective of financial stability in the UK. The division of responsibilities is based on four guiding principles: • clear accountability . Each authority must be accountable for its actions, so each must have unambiguous and well-defined responsibilities; • transparency . Parliament, the markets and the public must know who is responsible for what; • avoidance of duplication . Each authority must have a clearly defined role, to avoid second guessing, inefficiency and the unnecessary duplication of effort. This will help ensure proper accountability; • regular information exchange . This helps each authority to discharge its responsibilities as efficiently and effectively as possible. The Bank's responsibilities 2. The Bank contributes to the maintenance of the stability of the financial system as a whole – one of its two core purposes. This involves: a. ensuring the stability of the monetary system as part of its monetary policy functions. It acts in the markets to deal with fluctuations in liquidity; b. overseeing financial system infrastructure systemically significant to the UK, in particular payments systems whether based in the UK or abroad. Continued… Index
    33. 33. Def fsa 3 The Bank's Responsibilities continued As the bankers' bank, the Bank stands at the heart of the payments system. It falls to the Bank to advise the Chancellor, and answer for its advice, on any major problem arising in these systems. The Bank is also closely involved in developing and improving the infrastructure and strengthening the system to help reduce systemic risk; c. maintaining a broad overview of the system as a whole. The Bank is uniquely placed to do this, being responsible for monetary stability and having representation on the FSA Board (through the Deputy Governor (financial stability)). Through its involvement in markets and payments systems it may be the first to spot potential problems. The Bank advises on the implications for UK financial stability of developments in the domestic and international markets and payments systems and assesses the impact on monetary conditions of events in the financial sector; d. undertaking, in exceptional circumstances, official financial operations, in accordance with the arrangements in paragraphs 13 and 14 of this Memorandum, in order to limit the risk of problems in or affecting particular institutions spreading to other parts of the financial system. The FSA's Responsibilities 3. The FSA's powers and responsibilities are set out in the Financial Services and Markets Act 2000. Within the scope of the Act, it is responsible for: a. the authorization and prudential supervision of banks, building societies, investment firms, insurance companies and brokers, credit unions and friendly societies; b. the supervision of financial markets, securities listings and of clearing and settlement systems; c. the conduct of operations in response to problem cases affecting firms, markets and clearing and settlements systems within its responsibilities, where: Continued… Index
    34. 34. Def fsa 4 The FSA's Responsibilities continued -the nature of the operations has been agreed according to the provisions of paragraphs 13 and 14 of this Memorandum; and -the operations do not fall within the ambit of the Bank defined in paragraph 2 above. (Such operations by the FSA may include, but would not be restricted to, the changing of capital or other regulatory requirements and the facilitation of a market solution involving, for example, an introduction of new capital into a troubled firm by one or more third parties.) d. regulatory policy in these areas, including that intended to promote the resilience to operational disruption of authorized firms and Recognized Bodies. The FSA advises on the regulatory implications for authorized firms and Recognized Bodies of developments in domestic and international markets and of initiatives, both domestic and international, such as EC directives. The Treasury's Responsibilities 4. The Treasury is responsible for: a. the overall institutional structure of financial regulation and the legislation which governs it, including the negotiation of EC directives b. informing, and accounting to Parliament for the management of serious problems in the financial system and any measures used to resolve them, including any Treasury decision concerning exceptional official operations as set out in paragraphs 13 and 14; and c. accounting for financial sector resilience to operational disruption within government. 5. The Treasury has no operational responsibility for the activities of the FSA and the Bank and shall not be involved in them. But there are a variety of circumstances where the FSA and the Bank will need to alert the Treasury about possible problems: for example, where a Continued… Index
    35. 35. Def fsa 5 The Treasury's Responsibilities continued serious problem arises, which could cause wider financial or economic disruption; where there is, or could be, a need for a support operation; where diplomatic or foreign relations problems might arise; where a problem might suggest the need for a change in the law; or where a case is likely to lead to questions to Ministers in Parliament. This list is not exhaustive, and there will be other relevant situations. In each case it will be for the FSA and Bank to decide whether the Treasury needs to be alerted. Information gathering 6. Through the exercise of its statutory responsibilities, the FSA gathers a wide range of information and data on the firms which it authorizes and supervises. The Bank similarly collects information and data that it needs to discharge its responsibilities. 7. The FSA and the Bank work together to avoid separate collection of the same data, to minimize the burden on firms. Where both need access to the same information, they reach agreement as to who should collect it, and how it should be transmitted to the other. Information Exchange 8. Free exchange of information is essential if each authority is to meet its responsibilities satisfactorily. Information exchange is to take place on several levels. The Bank's Deputy Governor (financial stability) is a member of the FSA Board, and the FSA Chairman sits on the Court of the Bank. At all levels, there should be close and regular contact between the FSA and the Bank, who maintain a program of second ments between the two institutions, to strengthen the links and foster a culture of co-operation. 9. The FSA and the Bank maintain information-sharing arrangements, to ensure that all Continued… Index
    36. 36. Def fsa 6 <ul><li>Information Exchange continued </li></ul><ul><li>information which is or may be relevant to the discharge of their respective responsibilities </li></ul><ul><li>will be shared fully and freely. Each seeks to provide the other with relevant information as </li></ul><ul><li>requested. The authority receiving this information ensures that it is used only for </li></ul><ul><li>discharging its responsibilities, and that it is not transmitted to third parties except where </li></ul><ul><li>permitted by law. </li></ul><ul><li>Standing Committee </li></ul><ul><li>10. The Standing Committee on Financial Stability is chaired by the Treasury and </li></ul><ul><li>comprises representatives of the Treasury, the Bank and the FSA. It is the principal forum </li></ul><ul><li>for agreeing policy and, where appropriate, coordinating or agreeing action between the </li></ul><ul><li>three authorities. It is also an important channel for exchanging information on threats to </li></ul><ul><li>UK financial stability. </li></ul><ul><li>11. Standing Committee meets on a monthly basis at deputies </li></ul><ul><li>(official) level to discuss individual cases of significance and other developments relevant </li></ul><ul><li>to financial stability. Meetings can be called at other times by any of the participating </li></ul><ul><li>authorities if it considers there to be an issue which needs to be addressed urgently. Each </li></ul><ul><li>authority is to have nominated representatives who can be contacted, and meet, at short </li></ul><ul><li>notice. </li></ul><ul><li>12. A sub-group of Standing Committee co-ordinates the authorities’ joint work on </li></ul><ul><li>financial sector resilience to operational disruption and maintains and tests tripartite </li></ul><ul><li>arrangements for effective crisis management in an operational disruption. </li></ul><ul><li>In exceptional circumstances, for instance where a support operation is being </li></ul><ul><li>Continued… </li></ul>Index
    37. 37. Def fsa 7 <ul><li>Standing Committee continued </li></ul><ul><li>considered, the Standing Committee meets at principals level, comprising the Chancellor of </li></ul><ul><li>the Exchequer, the Governor of the Bank and the Chairman of the FSA (or senior </li></ul><ul><li>alternates). The Bank and the FSA are each to assess, from the perspective of their distinct </li></ul><ul><li>responsibilities and expertise, the seriousness of the crisis and its potential implications for </li></ul><ul><li>the stability of the financial system as a whole. They will each provide their separate </li></ul><ul><li>assessments to the Treasury, together with their views on the options available to the </li></ul><ul><li>Chancellor. Standing Committee may then discuss the appropriate use of measures and </li></ul><ul><li>ensure effective co-ordination of the response, while respecting the formal responsibilities </li></ul><ul><li>of the three authorities (subject to paragraph 14). </li></ul><ul><li>Financial Crisis Management </li></ul><ul><li>In exceptional circumstances, there may be a need for an operation which goes beyond </li></ul><ul><li>the Bank's published framework for operations in the money market. Such a support </li></ul><ul><li>operation is expected to happen very rarely and would normally only be undertaken in the </li></ul><ul><li>case of a genuine threat to the stability of the financial system to avoid a serious disturbance </li></ul><ul><li>in the UK economy. If the Bank or the FSA identified a situation where such a support </li></ul><ul><li>operation might become necessary, they would immediately inform the other authorities </li></ul><ul><li>and invoke the co-ordination framework outlined in paragraph 16 below. Ultimate </li></ul><ul><li>responsibility for authorization of support operations in exceptional circumstances rests with </li></ul><ul><li>the Chancellor. Thereafter they would keep the Treasury informed about the developing </li></ul><ul><li>situation, as far as circumstances allowed. </li></ul><ul><li>In any such exceptional circumstances, the authorities' main aim would be to reduce </li></ul><ul><li>the risk of a serious problem causing wider financial or economic disruption. In acting to </li></ul><ul><li>Continued… </li></ul>Index
    38. 38. <ul><li>Financial Crisis Management continued </li></ul><ul><li>do this, they would seek to minimize both moral hazard in the private sector and financial </li></ul><ul><li>risk to the taxpayer arising from any support operation. </li></ul><ul><li>The authorities maintain a framework for co-ordination in the management of a </li></ul><ul><li>financial crisis. This includes arrangements that determine which authority would take the </li></ul><ul><li>lead on particular problems arising and for ensuring orderly communication with market </li></ul><ul><li>participants and overseas authorities. </li></ul><ul><li>Each authority would: </li></ul><ul><li>• assess the situation and co-ordinate their response within the framework agreed with the other authorities. The form of the response would depend on the nature of the event and would be determined at the time; and </li></ul><ul><li>• where possible and desirable to facilitate a solution to a problem, and hence reduce risks to wider financial stability, encourage negotiations between third parties whose agreement might be beneficial for the reduction or resolution of the issue, in its area of responsibility. </li></ul><ul><li>Operational Crisis Management </li></ul><ul><li>17. The authorities also maintain a framework for co-ordination in the management of an </li></ul><ul><li>operational crisis. In a major operational disruption, the respective roles of the authorities’ </li></ul><ul><li>are as follows: </li></ul><ul><li>a. The Treasury is to ensure that ministers are kept up-to-date on developments so as to be able to take key decisions without delay; and to ensure coherence </li></ul><ul><li>between measures taken in the financial sector and the operation of public sector continuity arrangements. The Treasury would have specific responsibility for: </li></ul><ul><li>Continued… </li></ul>Index
    39. 39. Operational Crisis Management continued • liaising with other UK government departments and authorities, including law enforcement agencies; and • maintaining contact and liaising with the UK Debt Management Office, particularly on the state of the gilts market. b. The Bank is to seek to ensure the orderly functioning of the UK’s financial markets, including the maintenance of adequate liquidity. The Bank would have specific responsibility for: • maintaining, through its market operations and as banker to the banking system, operational contacts with market participants so as to monitor and, as necessary, facilitate the functioning of UK markets; this may include the provision of liquidity assistance or other support operations agreed within the tripartite framework; and • monitoring and, as necessary, facilitating the functioning of payment systems, alongside its operational role of providing settlement facilities for the Real Time Gross Settlement system. c. The FSA is to monitor the health of institutions that fall within its regulatory remit and ensure, as far as is appropriate in the circumstances, continuing compliance with regulatory standards. The FSA would have specific responsibility for: • monitoring authorized firms and Recognized Bodies within the framework of the FSA's four statutory objectives where liaison would usually be via normal supervisory contacts; and • working with authorized firms and Recognized Bodies to resolve any problems that Continued… Index
    40. 40. <ul><li>Membership of Committees continued </li></ul><ul><li>may prevent them from operating normally, or from acting on either their own or their customers’ behalf, in accordance with usual regulatory requirements. </li></ul><ul><li>Consultation on policy changes </li></ul><ul><li>Each authority will inform the other about any major policy changes. It will consult </li></ul><ul><li>the other in advance on any policy changes which are likely to have a bearing on the </li></ul><ul><li>responsibilities of the other. </li></ul><ul><li>19. The FSA and the Bank cooperate fully in their relations with international regulatory </li></ul><ul><li>groups and committees. They are both represented on the Basle Supervisors' Committee, the </li></ul><ul><li>European Central Bank’s Banking Supervisors' SubCommittee and on other international </li></ul><ul><li>committees. Where only one authority is represented, it will ensure that the other can </li></ul><ul><li>contribute information and views in advance of any meeting; and will report fully to the </li></ul><ul><li>other after the meeting. This promotes co-operation and minimizes duplication. 20. The </li></ul><ul><li>FSA and the Bank will keep the Treasury informed of developments in the international </li></ul><ul><li>regulatory community which are relevant to its responsibilities. </li></ul><ul><li>21. The Bank chairs the following domestic market committees: </li></ul><ul><li>• Money Market Liaison Group </li></ul><ul><li>• Foreign Exchange Joint Standing Committee </li></ul><ul><li>• Securities Lending and Repo Committee </li></ul><ul><li>22. The FSA and the Bank will each use best endeavors to facilitate contacts by the other </li></ul><ul><li>with overseas central banks and/or regulators, where necessary to discharge their respective </li></ul><ul><li>Continued… </li></ul>Index
    41. 41. Litigation continued responsibilities. Provision of services 23. In some cases it is more efficient for a service to be provided by the FSA to the Bank, or vice versa, rather than for both authorities to meet their own needs separately. Where necessary, service agreements between the two authorities are maintained, setting out the nature of the service to be provided, together with agreed standards and other details. 24. The Bank retains responsibility for any liability attributable to its acts or omissions in the discharge or purported discharge of its banking supervisory functions prior to the transfer of those functions to the FSA and shall have the sole conduct of any proceedings relating thereto. The two authorities will cooperate fully where either faces litigation. Records 25. The FSA is responsible for the custody of all supervisory records. It ensures that, within the framework of the relevant legislation, the Bank has free and open access to these records. Rt. Hon Gordon Brown MP Chancellor of the Exchequer Mervyn King Governor of the Bank of England Sir Callum McCarthy Chairman, Financial Services Authority Index
    42. 42. Def fsa slide 10 PRINCIPALS DEFINITIONS Financial Services Authority (FSA)‏ The FSA regulates the activities of Swiss Finance Corporation and other registered entities in the UK. There is a defined co-operation between HM Treasury (the ‘Treasury’), the Bank of England (the ‘Bank’) and the Financial Services Authority (the FSA) in the field of financial stability. The FSA advises on the regulatory implications for authorized firms and Recognized Bodies of developments in domestic and international markets and of initiatives, both domestic and international. There is a 10 page discussion regarding the FSA that details the duties of the FSA and partner regulating agencies. It is crucial to understand the distinction between regulated and unregulated entities in the world of currency trading. Please access this section from the Definitions link off the main menu. Back The definitions are found on Investopedia.com
    43. 43. Def hedge fund PRINCIPALS DEFINITIONS Hedge Fund An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment.  Investments in hedge funds are illiquid as they often require investors keep their money in the fund for a minimum period of at least one year.   For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to sophisticated investors . In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of over $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super-rich. They are similar to mutual funds in that investments are pooled and professionally managed, but differ in that the fund has far more flexibility in its investment strategies.    It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. The name is mostly historical, as the first hedge funds tried to hedge against the downside risk of a bear market with their ability to short the market (mutual funds generally can't enter into short positions as one of their primary goals). Nowadays, hedge funds use dozens of different strategies, so it isn't accurate to say that hedge funds just &quot;hedge risk&quot;. In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market. Index The definitions are found on Investopedia.com
    44. 44. Def interbank PRINCIPALS Interbank The financial system and trading of currencies among banks and financial institutions, excluding retail investors and smaller trading parties . While some interbank trading is performed by banks on behalf of large customers, most interbank trading takes place from the banks' own accounts .   The interbank market for forex serves commercial turnover of currency investments as well as a large amount of speculative, short-term currency trading. According to data compiled in 2004 by the Bank for International Settlements, approximately 50% of all forex transactions are strictly interbank trades. DEFINITIONS The definitions are found on Investopedia.com Index
    45. 45. Def interbank slide 18 PRINCIPALS Interbank The financial system and trading of currencies among banks and financial institutions, excluding retail investors and smaller trading parties . While some interbank trading is performed by banks on behalf of large customers, most interbank trading takes place from the banks' own accounts .   The interbank market for forex serves commercial turnover of currency investments as well as a large amount of speculative, short-term currency trading. According to data compiled in 2004 by the Bank for International Settlements, approximately 50% of all forex transactions are strictly interbank trades. DEFINITIONS The definitions are found on Investopedia.com Back
    46. 46. Def leverage PRINCIPALS DEFINITIONS Leverage 1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. 2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged. Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value. Discussion: a. Leverage can be created through options, futures, margin and other financial instruments. For example, say you have $1,000 to invest. This amount could be invested in 10 shares of Microsoft stock, but to increase leverage, you could invest the $1,000 in five options contracts. You would then control 500 shares instead of just 10. b. Most companies use debt to finance operations. By doing so, a company increases its leverage because it can invest in business operations without increasing its equity. For example, if a company formed with an investment of $5 million from investors, the equity in the company is $5 million - this is the money the company uses to operate. If the company uses debt financing by borrowing $20 million, the company now has $25 million to invest in business operations and more opportunity to increase value for shareholders. Index The definitions are found on Investopedia.com
    47. 47. Def leverage slide 5 PRINCIPALS DEFINITIONS Leverage 1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. 2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged. Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value. Discussion: a. Leverage can be created through options, futures, margin and other financial instruments. For example, say you have $1,000 to invest. This amount could be invested in 10 shares of Microsoft stock, but to increase leverage, you could invest the $1,000 in five options contracts. You would then control 500 shares instead of just 10. b. Most companies use debt to finance operations. By doing so, a company increases its leverage because it can invest in business operations without increasing its equity. For example, if a company formed with an investment of $5 million from investors, the equity in the company is $5 million - this is the money the company uses to operate. If the company uses debt financing by borrowing $20 million, the company now has $25 million to invest in business operations and more opportunity to increase value for shareholders. Back The definitions are found on Investopedia.com
    48. 48. Def libor rate PRINCIPALS DEFINITIONS LIBOR- London Interbank Offered Rate An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers' Association. The LIBOR is derived from a filtered average of the world's most creditworthy banks' interbank deposit rates for larger loans with maturities between overnight and one full year.   The LIBOR is the world's most widely used benchmark for short-term interest rates . It's important because it is the rate at which the world's most preferred borrowers are able to borrow money. It is also the rate upon which rates for less preferred borrowers are based. For example, a multinational corporation with a very good credit rating may be able to borrow money for one year at LIBOR plus 4 or 5 points.  Countries that rely on the LIBOR for a reference rate include the United States, Canada, Switzerland and, of course, England. Index The definitions are found on Investopedia.com
    49. 49. Def liquidity PRINCIPALS DEFINITIONS Liquidity 1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity. 2. The ability to convert an asset to cash quickly. Also known as &quot;marketability&quot;.   1. It is safer to invest in liquid assets than illiquid ones because it is easier for you to get your money out of the investment. 2. Examples of assets that are easily converted into cash include blue chip and money market securities. Index The definitions are found on Investopedia.com
    50. 50. Def liquidity slide 9 PRINCIPALS DEFINITIONS Liquidity 1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity. 2. The ability to convert an asset to cash quickly. Also known as &quot;marketability&quot;.   1. It is safer to invest in liquid assets than illiquid ones because it is easier for you to get your money out of the investment. 2. Examples of assets that are easily converted into cash include blue chip and money market securities. Back The definitions are found on Investopedia.com
    51. 51. Def manager of managers PRINCIPALS DEFINITIONS Manager Of Managers - MOM A class of financial intermediary that hires professional investment managers to oversee aspects of a client's investment fund. More specifically, the MOM tracks the performance of each investment manager and has the power to fire ineffective managers and then hire replacements on a client's behalf. Using a MOM to handle investments funds is an alternative to hiring a single investment portfolio manager that makes all the asset management decisions.   For example, suppose that a teacher's union hires a MOM to invest its pension fund. The MOM then hires a number of investment managers (such as a bond expert, a money market expert and a large-cap stock expert); each has the responsibility of managing the particular asset class in which he or she specializes.  Because no single manager is an expert at investing in all asset classes, using a MOM allows clients to have an expert asset manager working on each aspect of an investment at all times. SFC Global Choice manages these efforts 24/7/365. If a trend does not support the efforts of a manager, another will be placed into the program. This construct is rarely available to most investors. For example, in his 2002 annual report of Berkshire Hathaway, Warren Buffett said that “a monkey will type out a Shakespearean play before an independent mutual fund director will suggest” firing an inept manager. Index The definitions are found on Investopedia.com
    52. 52. Def manager of managers slide 21 PRINCIPALS DEFINITIONS Manager Of Managers - MOM A class of financial intermediary that hires professional investment managers to oversee aspects of a client's investment fund. More specifically, the MOM tracks the performance of each investment manager and has the power to fire ineffective managers and then hire replacements on a client's behalf. Using a MOM to handle investments funds is an alternative to hiring a single investment portfolio manager that makes all the asset management decisions.   For example, suppose that a teacher's union hires a MOM to invest its pension fund. The MOM then hires a number of investment managers (such as a bond expert, a money market expert and a large-cap stock expert); each has the responsibility of managing the particular asset class in which he or she specializes.  Because no single manager is an expert at investing in all asset classes, using a MOM allows clients to have an expert asset manager working on each aspect of an investment at all times. SFC Global Choice manages these efforts 24/7/365. If a trend does not support the efforts of a manager, another will be placed into the program. This construct is rarely available to most investors. For example, in his 2002 annual report of Berkshire Hathaway, Warren Buffett said that “a monkey will type out a Shakespearean play before an independent mutual fund director will suggest” firing an inept manager. Back The definitions are found on Investopedia.com
    53. 53. Def margin call PRINCIPALS DEFINITIONS Margin Call A broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. This is sometimes called a &quot;fed call&quot; or &quot;maintenance call&quot;.   You would receive a margin call from a broker if one or more of the securities you had bought (with borrowed money) decreased in value past a certain point. You would be forced either to deposit more money in the account or to sell off some of your assets. Index The definitions are found on Investopedia.com
    54. 54. Def margin call slide 18 PRINCIPALS DEFINITIONS Margin Call A broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. This is sometimes called a &quot;fed call&quot; or &quot;maintenance call&quot;.   You would receive a margin call from a broker if one or more of the securities you had bought (with borrowed money) decreased in value past a certain point. You would be forced either to deposit more money in the account or to sell off some of your assets. Back The definitions are found on Investopedia.com
    55. 55. Def market maker PRINCIPALS DEFINITIONS Market Maker A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds.   The Nasdaq is the prime example of an operation of market makers. There are over 500 member firms that act as Nasdaq market makers, keeping the financial markets running efficiently because they are willing to quote both bid and offer prices for an asset. Index The definitions are found on Investopedia.com
    56. 56. Def market maker slide 20 PRINCIPALS DEFINITIONS Market Maker A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds.   The Nasdaq is the prime example of an operation of market makers. There are over 500 member firms that act as Nasdaq market makers, keeping the financial markets running efficiently because they are willing to quote both bid and offer prices for an asset. Back The definitions are found on Investopedia.com
    57. 57. Def price maker PRINCIPALS DEFINITIONS Price Maker A monopoly or a firm within monopolistic competition that has the power to influence the price it charges as the good it produces does not have perfect substitutes.   A monopoly is a price maker as it holds a large amount of power over the price it charges. A price maker that is a firm within monopolistic competition produces goods that are differentiated in some way from its competitors' products. This kind of price maker is also a profit-maximizer as it will increase output only as long as its marginal revenue is greater than its marginal cost, in other words, as long as it's producing a profit. Index The definitions are found on Investopedia.com
    58. 58. Def price maker Slide 20 PRINCIPALS DEFINITIONS Price Maker A monopoly or a firm within monopolistic competition that has the power to influence the price it charges as the good it produces does not have perfect substitutes.   A monopoly is a price maker as it holds a large amount of power over the price it charges. A price maker that is a firm within monopolistic competition produces goods that are differentiated in some way from its competitors' products. This kind of price maker is also a profit-maximizer as it will increase output only as long as its marginal revenue is greater than its marginal cost, in other words, as long as it's producing a profit. Back The definitions are found on Investopedia.com
    59. 59. Def principal PRINCIPALS DEFINITIONS Principal 1. The amount borrowed or the amount still owed on a loan, separate from interest. 2. The original amount invested, separate from earnings. 3. The face value of a bond . 4. The owner of a private company . 5. The main party to a transaction, acting as either a buyer or seller for his/her own account and risk. Can also be referred to as &quot;corpus.&quot;   Be sure to take into account the context in which this term is used, as the exact meaning of the term has many variations.  Index The definitions are found on Investopedia.com
    60. 60. Def principal slide 9 PRINCIPALS DEFINITIONS Principal 1. The amount borrowed or the amount still owed on a loan, separate from interest. 2. The original amount invested, separate from earnings. 3. The face value of a bond . 4. The owner of a private company . 5. The main party to a transaction, acting as either a buyer or seller for his/her own account and risk. Can also be referred to as &quot;corpus.&quot;   Be sure to take into account the context in which this term is used, as the exact meaning of the term has many variations.  Back The definitions are found on Investopedia.com
    61. 61. Def Transaction fees Transaction Fees Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price at which it can be sold). Also referred to as &quot;Transaction Costs.&quot;   This is what a broker or bank makes for being the middleman in a transaction. DEFINITIONS Index The definitions are found on Investopedia.com
    62. 62. Def Transaction fees slide 7 Transaction Fees Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price at which it can be sold). Also referred to as &quot;Transaction Costs.&quot;   This is what a broker or bank makes for being the middleman in a transaction. DEFINITIONS Back The definitions are found on Investopedia.com
    63. 63. Sharpe ratio PRINCIPALS DEFINITIONS Sharpe Ratio <ul><li>Benchmark measuring risk adjusted performance </li></ul><ul><li>The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance </li></ul><ul><li>(Developed by William Sharpe, Nobel laureate 1964)‏ </li></ul><ul><li>SFC/Pacstar Sharpe ratio: 3.50 </li></ul><ul><li>S&P 500 1.65 </li></ul><ul><li>Nasdaq 1.34 </li></ul><ul><li>Dow Jones Industrials 1.12 </li></ul>Data from Risk Metrics Group www.riskmetrics.com Continued on next page Index
    64. 64. Sharpe Ratio Calculation Sharpe Ratio Calculation Calculated by subtracting the risk-free rate from the rate of return for the investment and dividing the result by the standard deviation of the returns . Sharpe Ratio = Investments Expected Returns – Risk Free Returns Investment Returns Standard Deviation The Sharpe ratio tells us whether the returns of a portfolio are due to smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance (Risk Free = Rate associated with 90 Day US Tbill)‏ Index

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