Corporate Scandal Assignment Example | Topics and Well Written Essays - 2750 words

Corporate Scandal - Assignment Example The firm initially started its operations by trading penny stocks, i.e. stocks of small companies which have less market capitalization and trade below $5 in the USA market. Penny stocks are very volatile and thus very risky for the investors who investors who invest in order to reap windfall gains. Madoff’s firm did not trade on the floor of the NYSE and rather traded in the OTC market. That is Madoff’s firms helped retail brokers trade directly with each other without intervention of an exchange. Thus it helped the stock traders maintain anonymity. Initially Madoff used the quotes available through National quotation Bureau’s stock quotes. But in order to compete in a better way with the firms that traded on the floor of New York Stock Exchange the firm developed a computer application that they used to distribute information of its quotes. This technology was later used to form NASDAQ. The firm commanded a good position in the market and at one time it was the largest market maker of NASDAQ and was the 6th largest in Wall Street among the market makers. The firm also had an investment management division that was not well published. The investment management arm also did advisory functions. His firm had several of his family members on board including his brother, brother’s daughter and his two sons. Mardoff and his firm was regarded as one of the masters in the third market with their average volume of trades equaling about 9% of the volumes traded by NYSE. Besides running his legitimate business Madoff investment securities LLC in 1960 which dealt with OTC trading of securities without the involvement of stock exchanges, Madoff also run an investment management firm named Ascot Partners. Through its investment management firm Madoff sought investments from various class of investors including celebrities, common man, banks, and other fund houses and promised them of steady returns. Madoff said that he was able to generate steady