More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
The Singapore unit of Citigroup is suing hedge fund manager Raghavendran Rajaraman over losses it says he incurred after the price of gold fell from its record in September.
According to a Bloomberg report, Rajaraman held some $19.2 million worth of gold in his account on Sept. 23. On Sept. 26, after it reached a so-called forced-sell level and got his authorization, according to court papers, the bank sold those holdings as well as other collateral, “in the face of a rapidly deteriorating market.”
Gold futures hit a record of $1,923.70 an ounce on Sept. 6, but subsequently lost 11% during the rest of the month. The drop in price when Rajaraman’s assets were sold and his account liquidated left Citi with a $1 million shortfall, according to a Nov. 18 lawsuit filed with the Singapore High Court. The first closed hearing is scheduled for Jan. 27.
Rajaraman, who has not yet filed a defense, was said in the lawsuit to work with hedge fund 3 Degrees Asset Management and was a currency options trader with Citigroup in Singapore until 2007. However, Moe Ibrahim, founder of the hedge fund, said that Rajaraman is not a 3 Degrees employee. In the report Ibrahim was quoted saying, “There was a plan to launch a fund together but it never came to fruition.”
While Citigroup’s Singapore-based spokesman Adam Abdur Rahman said in the report, “We intend to pursue the case and it’s inappropriate for us to comment further,” a letter from Rajaraman’s law firm Oldham, Li & Nie to the bank’s lawyers on Oct. 7 said that Citi had breached its agreement with Rajaraman by closing his account without prior notice.
“As a direct consequence of the bank’s breach,” the letter alleged, Rajaraman incurred a loss of $1.7 million, representing his collateral. He further incurred a loss of $1.03 million because the bank liquidated the account prematurely, said the lawyers in the letter, instead of waiting for 24 hours after the account reached the force-sell level.