More On Legal & Compliance
from The Advisor's Professional Library- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIA’s failure to stay within the scope of the Section 28(e) safe harbor may violate the advisor’s fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients’ transactions.
- U.S. Securities and Exchange Commission Information This information sheet contains general information about certain provisions of the Investment Advisers Act of 1940 and selected rules under the Adviser’s Act. It also provides information about the resources available from the SEC to help advisors understand and comply with these laws and rules.
A rogue trader could be responsible for Switzerland’s biggest bank failing to be profitable in the third quarter, after he managed to siphon off $2 billion in unauthorized trading. A suspect was taken into custody in London early Thursday morning.
Bloomberg reported that UBS AG’s executive board said in a memo to employees that management plans to “get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened,” and added, “While the news is distressing, it will not change the fundamental strength of our firm.” Perhaps not, but the firm’s stock fell as much as 9.6% in Switzerland on the news.
Then late Thursday Moody's Investors Service placed UBS on review for a possible downgrade over its risk control measures.
Meanwhile, The Telegraph reported that the suspect in custody was a UBS employee named Kweku Adoboli who worked in the ETF area. The police statement, which did not identify him, said, "A 31-year old man was arrested at 3.30 AM in central London on suspicion of fraud by abuse of position. He remains in custody."
Reuters reported that in its statement, the bank said, "The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2 billion." It also said that client positions were unaffected. According to the Swiss newspaper Neue Zuercher Zeitung, the losses were discovered Wednesday afternoon, and were in the equities unit in London.
In a note, Goldman Sachs analysts Jernei Omahen and Peter Skoog wrote, "This loss has the scope to have a material impact on the perception of UBS' private bank, impacting its future operating trends. Today's announcement therefore adds to the long list of arguments (and pressure) for a substantially smaller investment bank."
Chris Roebuck, visiting professor at Cass Business School in London, was quoted in the report saying the loss was "a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting round them if they want to. It will yet again confirm to the majority of shareholders who are Swiss that investment banking is not 'proper' banking, as private banking is."
Read about Moody's potential downgrade of UBS at AdvisorOne.
