More On Legal & Compliancefrom The Advisor's Professional Library
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
As further details emerge regarding its recent $2.3 billion trading loss, UBS interim CEO Sergio Ermotti has decided against spinning off or selling the investment bank and, instead, plans to reduce its size, especially in its fixed-income work, according to a report in Thursday’s Wall Street Journal.
Ermotti was appointed chief following Oswald Gruebel's resignation in September after UBS' investment bank revealed losses due to the actions of an alleged rogue trading. The co-heads of global equities, Francois Gouws and Yassine Bouhara, also have left, and the bank has suspended some front-office staff, a recent Reuters report says.
UBS is set to report its third-quarter results next Tuesday. It is expected that Ermotti could outline his plans at an investor meeting on Nov. 17, according to the Wall Street Journal, which also suggests that Ermotti may cut some capital access for the investment bank and share more resources with UBS wealth-management operations.
The bank did not return a request for information to AdvisorOne.
Meanwhile, prosecutors in London said Thursday that Kweku Adoboli, the trader accused of losing $2.3 billion by making unauthorized trades, falsified records specifically on exchange-traded-fund transactions, according to a Bloomberg report published Thursday.
Adoboli, 31, traded ETFs tied Standard & Poor’s 500, DAX and EuroStoxx index futures, the bank told Bloomberg, and he hid the risk associated with these ETF holdings with fake positions.
The former UBS employee is expected to enter a plea regarding charges of fraud and false accounting in a criminal court in London on Nov. 22.
At UBS, Adoboli, who is a citizen of Ghana, worked for the Delta One desk, which handles client trading but also uses the bank’s own money. UBS has said that no client funds or holding were affected by his activities.
In August, the bank said it planned to cut some 3,500 jobs, almost half of them from its investment bank, with the aim of trimming about 2 billion Swiss francs from annual costs by the end of 2013.