This summer, The Globe and Mail’s Dave McGinn takes the pros to the movies – people whose real lives, professions and passions are flickering up on the big screen – to see where seasonal silliness and reality intersect. For this week's final instalment: Chasing Madoff.
Harry Markopolos isn’t your traditional gumshoe. He found the biggest financial crook of the 21st century through number-crunching. Markopolos, a chartered financial analyst, spent nearly a decade unsuccessfully trying to convince authorities that Bernard Madoff was running a Ponzi scheme, a mission chronicled in the documentary Chasing Madoff.
Peter Jarvis, executive director of the Toronto CFA Society, explains why Markopolos isn’t your typical financial analyst and talks about whether you should hide your money under your bed.
What does a CFA do?
CFA stands for chartered financial analyst. This is really the gold standard for certification in the finance business.
You’re friends with Harry Markopolos. How do you two know each other?
Harry was the president of the Boston Society of Security Analysts and I was president of what was then the Toronto Society for Financial Analysts. (We rebranded ourselves as the Toronto CFA Society about eight or nine years ago.) So I know Harry through that.
How often will a CFA sniff out wrongdoing? The movie is framed like a detective story, but I can’t imagine CFAs are rooting out fraud like that on a regular basis.
To the extent that CFAs are stock analysts, and that’s the sort of No. 1 spot in portfolio managers, finding companies that have either been dishonest or have misleading statements or are simply not good companies to invest in is the raison d’être of a chartered financial analyst. In Harry’s case, he found a hedge-fund manager who was just a crook, and unbelievably he was being given money by just an amazing number of people. But often the headline you would more often associate with a chartered financial analyst would be one where you recommend not to buy a company or to sell a company based upon the analysis that you have done. And that actually is quite common.
Did the profession get a black eye around the time Madoff turned himself in? It’s pretty amazing in the movie that no one would listen to Harry. That can’t be good for people’s confidence in the world of finance and financial analysts.
There’s absolutely no question that our profession is in some disrepute based upon all the financial finagling and poor behaviour that you’ve seen since 2008. You can even go back to the tech bubble in 2001. There’s been a whole series of basically developments and misbehaviour in markets that have caused overall financial markets to be in disrepute. From a financial analyst point of view – and this is not to say that financial analysts are angels by any stretch of the imagination – I think it’s actually been good for us. Employers have become perhaps more aligned with what it is that the course teaches, and also the kind of environment that the CFA Society itself tries to embody.
What did you think of the movie as someone who works in that industry?
There’s an element to the movie that I’m sure would bore other people to tears but that I thought was just fascinating. I thought Harry’s partner, Frank Casey, was terrific in particular, in terms of describing Harry’s mindset and describing the situation. He seemed to be kind of the easygoing one where Harry was very much the person who was quite a bit more stressed.
Is there anything it left out that you would have liked to have been included?
I wish they had more of the congressional testimony. I really liked the scene where there is a congressman yelling at the Securities and Exchange Commission, but I wish they talked more about the SEC really dropping the ball. It’s an incredible indictment of the SEC. This is the organization that is supposed to be the policeman of the financial markets, but they were all asleep at the switch.
What did you make of all the old-timey gangster footage the film uses when it discusses Harry being afraid for his life?
I think it really does give a good sense of probably where Harry’s mindset was.
How do you think a CFA will watch this movie compared to English majors?
People who are trained in the financial markets are just going to be incredulous. It’s unbelievable that they could have had this information and not done anything about it.
There are several interviews with Madoff clients who lost everything. Is the message of this movie that I should keep my money hidden under my mattress?
I don’t know if you get that from this movie particularly, other than a great sense of disquiet and unease about the regulatory environment that we’re dealing with. They’re just totally inept in terms of regulating markets. Like any game, if you don’t have a referee that is enforcing the rules, people take advantage of them.
This interview has been condensed and edited.Report Typo/Error