More On Legal & Compliancefrom The Advisor's Professional Library
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
In its quest to raise cash and get risky assets off its balance sheet, Credit Suisse Group found some willing buyers very close to home: its own employees.
Senior bankers who got illiquid loans and bonds as part of their pay participated in the Expanded Partner Asset Facility, which closed Dec. 31, and put a total of $450 million of their own funds into it.
Bloomberg reported that the new fund would use the leverage of borrowed money to buy more than $450 million of assets. The report cited someone familiar with the arrangement saying that Credit Suisse may act as the lender to the employee fund, and the reduction in so-called risk-weighted assets will reduce Credit Suisse’s capital requirements.
Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York, was quoted saying, “This is an advantage to the company, if priced correctly, in that it will reduce their capital charges and liquefy their balance sheet. The question is what goes into it, how is it being valued and are they using a third-party firm to value it? Because to do anything else is a transfer of value from the shareholders to the employees.”
A person familiar with the details was cited saying that the bank did not use a third party to value assets, which were transferred at market prices in accordance with the bank’s compliance controls.
Douglas Elliott, a former investment banker and now an economic studies fellow at the Brookings Institution in Washington, was quoted saying, “If the price at which you’re transferring the assets is based on market pricing, then you could just as easily take it to the market and do the same thing. If it’s not based on market pricing, then you have the risk you’re selling it too low.”
As part of their 2008 compensation, people familiar with the matter said that Credit Suisse had given approximately 2,000 managing directors and directors, its most senior ranks of employees, stakes in a $5 billion pool of illiquid assets. By mid-2010 the fund’s value had risen as much as 60%, although more recent data on the pool’s performance has not been made public.