Michigan Business and Commercial Law Blog

Some business models have been particularly strained by the economic storm of the Great Recession. While the partnership between a franchiser and a franchisee can be a mutually beneficial relationship, conflicts have become more commonplace in today's business climate.

For three consecutive years, the number of U.S. franchises has been in decline. Yet, even those that have thus far been able to survive the downturned economy have felt its chilling effects: tensions in franchisee-franchisor relationships have been magnified by stagnant profits, resulting in a proliferation of franchise contract disputes.

Investors are taking cautious steps with the current, unsteady economy. However, the administrators of Ponzi schemes continue to profit. Although losses from these investments are difficult to recoup, tax breaks are available for victims.

Ponzi Scheme Defined

A Ponzi scheme generally occurs when individuals unknowingly make an investment in a product that does not exist. The money is used to pay off previous investors, and collapses when the consistent flow supplied by new investors' stops or when a large number of investors attempt to cash out.

In the wake of the Bernie Madoff Ponzi scheme and the revelation that people had called the Securities Exchange Commission to report that something was amiss with Madoff's business practices for several years prior to the revelation of his investment fraud, the SEC has designed a $12 million Tips, Complaints and Referrals (TCR) Database to improve how it responds to information it receives about suspicious activity in the securities market.

Before the SEC implemented the database, the SEC's 11 regional offices received tips regarding allegations of state and federal securities laws violations by phone, fax and even handwritten letters. If one office decided that a tip was without merit and decided not to pursue it, the other offices remained unaware of the tip because there was no way to share information between offices. Thus, if a different regional office got another tip regarding the same suspicious activity, the agent investigating the tip would have no way of knowing about any past reports at other offices.

Even though Bernie Madoff's elaborate Ponzi scheme collapsed over two years ago, the reverberations of the scandal still ripple today in the consciousness of those who work in the investment field. Immediately following the news of Madoff's scheme, the Securities and Exchange Commission (SEC) intensified fraud training for its inspectors. In 2009, the SEC passed rules to fortify the rights of investors. Most recently, the SEC voted unanimously to draft new rules which will make it easier for regulators to hold those brokerage firms that misappropriate investor funds accountable.

SEC Chairman Mary L. Schapiro insists that the new regulations are intended to shore up investor confidence in the market by ensuring that brokerage firms handle customer assets in the manner that the customers direct them to.