More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- The New and Improved Form ADV Whether an RIA is describing its investment strategy in advertisements or in the new Form ADV Part 2, it is important the firm articulates material risks faced by advisory clients and avoids language that might be construed as a guarantee.
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.