More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
Administration and Congressional officials announced Sunday, September 28, that they had compromised on the $700 billion financial services bailout plan and would send the revised, 110-page bill to the House of Representatives on Monday, September 29, where many expect there to be significant debate before the bill is sent to the Senate. However, Congress has already delayed its much-loved pre-election adjournment, so quick action is expected.
The bill differs in significant ways from the original four-page prayer submitted by Treasury Secretary Henry Paulson. While the total size of the bailout remains as it was in the original, now the authority to purchase up to $700 billion in distressed mortgages was given in tranches: first $250 million, then an additional $100 million can be requested by the President; if he so desires, he can request the remaining $350 million, but Congress can block the request if it so desires.
The bill now also requires stricter Congressional oversight of the practice of buying and selling the debt instruments; limits the compensation of some executives at companies involved in the Treasury process; requires companies to give warrants to the government convertible to stock; creates a new kind of debt insurance; and allows the government to approve "reasonable" adjustments to mortgages it assumes. Finally, should the government not recoup the $700 billion through the sale of the mortgages it acquires, the bill requires the President to get that amount back from the industry in an unspecified manner.
Meanwhile, there were fresh signs that more banks were being hit by the credit crisis both in the U.S. and abroad. After a week that saw the government seize and sell the largest U.S. savings and loan company, Washington Mutual, the fourth largest commercial bank--Wachovia--was in talks to sell itself to either Wells Fargo or Citigroup.
The crisis was also spreading to Europe, where there was speculation that a bailout plan similar to the U.S. move might be necessary as regulators in the U.K., Belgium, Luxemborg, and The Netherlands moved to nationalize two banks that had significant exposure to bad mortgage debt: Fortis, the Belgian-Dutch bank, and Bradford & Bingley, a big U.K. mortgage lender. It would be the third British bank to fail this year, after Northern Rock and HBOS.