More On Legal & Compliancefrom The Advisor's Professional Library
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
CIT Group Inc.'s holding company filed for Chapter 11 bankruptcy in New York on November 1, a move that was expected but which still constitutes one of the largest bankruptcies in U.S. history. The big lender had received $2.3 billion in December 2008 from the government under the Troubled Asset Relief Program (TARP) to keep it above water, but the weakness of its loan portfolio and its failure to secure financing in the public markets, or FDIC protection, led to the filing. However, the company said it expected to emerge from Chapter 11 by the end of the year, helped by promised line of credit from Carl Icahn, who is CIT's largest bondholder.
As of June 30, CIT and its operating units had $71 billion of assets and $64.9 billion of debt. Under the filing, existing debt would be replaced with new debt, but it's unlikely that the Treasury will get back its entire investment.
"We will be following developments very closely with an eye toward protecting taxpayers ... but as the company's disclosure on the prepackaged bankruptcy makes clear ... recovery to preferred and common equity holders will be minimal," Treasury spokesman Andrew Williams said.