More On Legal & Compliancefrom The Advisor's Professional Library
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
Authorities are investigating whether the London Interbank Offered Rate (LIBOR), the benchmark for borrowing costs among banks, was manipulated before and during the financial crisis, in 2007 and 2008. On Thursday an unnamed source said in a Reuters report that the probe is focused on five banks, including U.S. institutions.
Regulators in the U.S., Britain, and Japan are looking into whether Bank of America, Citigroup, Barclays, WestLB andUBS might have made “improper attempts” to manipulate the dollar LIBOR rate.
On Tuesday, UBS, a Swiss bank, said it had received subpoenas from U.S. and Japanese regulators on the matter. Thursday’s Financial Times was reported to say that Bank of America, Citi, and Barclays had also received subpoenas, and that while investigators wanted information from German bank WestLB, the bank had not received a subpoena.
LIBOR prices are set daily by the British Bankers Association (BBA), which said it has a calculation method to determine the benchmark that discards anything not in line with the interest rates used by major world lenders. Banks state the rates at which they expect prime banks to offer funding among themselves at 11:00 GMT. Sixteen banks had input into the dollar rates in 2008; the highest and lowest four are discarded and the remaining ones averaged to determine the rate.
During the financial crisis, when rates spiked, there was criticism that they did not reflect true market prices. The BBA said in December of 2008 that it would increase governance and scrutiny, and earlier this year four more banks were added to those which contribute to the dollar rate.
Reuters reported that, among the banks, only UBS commented; the rest either could not be reached or declined comment. Regulators also declined to comment.