Mark Mobius: scandals reflect global governance failure

13 January 2009:

Speaking to Citywire from Hong Kong, Mobius said that the Satyam scandal was 'amazing,' but emphasised that poor corporate governance is not restricted to developing regions.

'It's not only emerging markets, it's global,' he says. 'We had Enron a few years ago and the whole banking crisis generally - it shows terrible corporate governance from everyone including the US and the UK. With Madoff, who was a respected leader in markets, it shows it really is everywhere.'

The result of the recent scandals will be closer scrutiny of companies and fund managers, he believes.
'Better surveillance and governance will come out of it as people are up in arms,' he says. 'Reliable and transparent information is needed. It is a global phenomenon, not just emerging markets, and even the smartest investors in the world get caught up in it.'

'When you see the list of investors with Madoff, you see it can happen to anyone,' he says. 'Everyone tries their best to be prudent, but I can understand how a lot of wealthy investors just trusted Madoff as he was prominent, well-known and respected.'

Referring to Harry Markopolos, the man who chased Madoff for years and even sent the SEC a document in 2005 entitled 'The World's Largest Hedge Fund is a Fraud,' Mobius thinks the US regulator failed dramatically in its task.

'For four years this guy was tracking Madoff, but the SEC looked and didn’t find anything. There clearly has to be much better surveillance,' he says. 'One of the warning signals was the fact that he didn’t have an independent clearing agency or custodian, unlike us who separate the assets from the manager. But it is the fault of everyone. People should have looked twice. We really have a regulatory problem that has to be solved; there must be unification.'