Investment Scheme Presentation developed to show how a bank should not be held liable for investment decisions made by trust account holders. Click to advance slides.

State Bank was not involved in investment advice and/or decisions

State Bank held “directed custodial trust” accounts for the Investment Group... Investors approached Smith and signed documents giving Smith complete control Investors Choose to invest in Investment Group Designated Smith as General Partner Investors

State Bank Must follow direction of investors Provides services for a fee, does not profit based on performance No audit rights State Bank held “directed custodial trust” accounts for the Investment Group......State Bank is involved solely because of type of funds (IRAs, etc.) Investors Choose to invest in Investment Group Designated Smith as General Partner $$$ State BankInvestors

State Bank Must follow direction of investors Provides services for a fee, does not profit based on performance No audit rights State Bank held “directed custodial trust” accounts for the Investment Group......State Bank is involved solely because of type of funds (IRAs, etc.) Investors Choose to invest in Investment Group Designated Smith as General Partner $$$ Investment GroupState BankInvestors Direction From Investors

Bob Smith Squanders $$$ as he sees fit and conceals fraud from everyone State Bank held “directed custodial trust” accounts for the Investment Group......State Bank gave NO advice or direction as to how the money was invested $$$ Direction From Investors State Bank Must follow direction of investors Provides services for a fee, does not profit based on performance No audit rights Investors Choose to invest in Investment Group Designated Smith as General Partner Smith Investment GroupState BankInvestors

Who are the Plaintiffs?

Who are the Plaintiffs? Wealthy individuals who are sophisticated, knowledgeable investors who presumably know how to properly research investments Business associates and friends of Smith Promises of extremely high investment returns led them to willingly take risks

Who are the Plaintiffs? Wealthy individuals who are sophisticated, knowledgeable investors who presumably know how to properly research investments Business associates and friends of Smith Students of Smith’s Investment Theory Classes Promises of extremely high investment returns led them to willingly take risks Blind belief in Smith and his authority position led to faulty judgment

Who are the Plaintiffs? Wealthy individuals who are sophisticated, knowledgeable investors who presumably know how to properly research investments Business associates and friends of Smith Students of Smith’s Investment Theory Classes...The Plaintiffs made their investment decisions for personal reasons, having NOTHING to do with State Bank Promises of extremely high investment returns led them to willingly take risks Blind belief in Smith and his authority position led to faulty judgment

How did Plaintiffs make their investment decisions? For whatever reason, the plaintiffs did not follow typical investment practices, and instead blindly followed Bob Smith...

Did the Plantiffs... Thoroughly research companies/entities NO

NO Did the Plantiffs... Thoroughly research companies/entities Perform Due Diligence regarding person who is making investments NO

NO Did the Plantiffs... Thoroughly research companies/entities Perform Due Diligence regarding person who is making investments Consider investment strategy — carefully calculating risk and realistic returns NO

Plaintiffs willingly took an enormous and irresponsible risk and are unwilling to accept their own responsibility in the scheme NO Did the Plantiffs... Thoroughly research companies/entities Perform Due Diligence regarding person who is making investments Consider investment strategy — carefully calculating risk and realistic returns NO

Who Should Bear the Loss? Irresponsible investors who willingly accepted the risk that Smith would “lose all the money” or trust companies that were providing a legitimate service?...The Plaintiffs should bear the loss