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.
- 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.
BlackRock CEO Larry Fink spoke with Bloomberg Television’s Market Makers on Tuesday and said that “our politicians are guardians too, and they’re not acting in ways that guardians should…Europe is a great wake-up call and they’re still snoring away.”
Fink went on to say, “we need more clarity, and that is my message to every politician I see…it’s all about confidence. No one is investing for tomorrow.”
Fink on the resignation of Barclays CEO Bob Diamond:
“For me it is sad. I know Bob very well. He was a very strong CEO. He led with a lot of emotion, which obviously pissed off some of the regulators and some other people within the U.K. He had the backing of his team. That is a very important component as a leader."
"Obviously, the allegations are quite serious now. I think it is important for a leader to step down if the situation gets so enormous that it breaks down the integrity of the institution. I think that’s why Bob ultimately stepped down. It became so large an unmanageable that he had no choice but to step down. It is a sad situation."
"It is another bad element, though, in terms of trust with the banks the banks worldwide. This is a growing problem. It is not going away. Here we are in July 2012. We have had essentially five years of breaking down of the trust between the clients, the marketplace and the banking community. It is a serious allegation. All banks have to find ways to rebuild this trust. Until we rebuild this trust, it is going to be very hard for Europe and the United States economies to stabilize beyond this anemic growth we are witnessing.”
On what the other banks that were involved should be prepared for:
“It really depends on what the leadership of the bank is today versus during these events. Second of all, at times of crisis, this is when board of directors is most important, because their job is to protect the institution. Their job is to show independence from management if there’s a need to do it. This is where you really see what the difference is between a great board, a good board, and a mediocre board. How they responded during crises and the speed which they respond to the crises. It depends on what the allegations and the findings are of all the regulators. The boards of these various institutions will have a big job in front of them to get prepared. I would imagine there are many more board meetings going on with these other institutions that we're not even aware of at this moment.”
On how much the board was involved in forcing Diamond out:
“It’s clear by the actions and I'm just speculating that the board wanted to buttress the leadership team. They thought the leadership team deserved to stay in the job. That’s why the events played out as they did. Obviously the miscalculation was an overwhelming politically and journalistically. It was a pretty large groundswell, so they had to change courses.”
“I don't think in the United States our recovery will fully get into its role until 2014. For the next year and a half we will have this anemic economy. We will get this modest recovery, modest job growth. It is all about confidence. No one is investing for tomorrow. You look at those huge pools of money sitting in cash, huge pools of money sitting in bonds. CEO behavior is not investing. CEOs are buying back shares as a mechanism to alleviate some of the pressures with shareholders, but they are not hiring, they are not building factories and plants as much as they would have if there were a clearer picture. There is a lack of confidence, and much of it has to do with the environment we are living with, whether it is Europe or the United States.”
“Politics plays such an enormous role in how our outlook is created. It is very hard to see beyond the European situation and very hard to see beyond what our Congress is going to do with our fiscal cliff. As a result of this, we are all pulling back. We are all reducing our investments, which is putting this strain on our economy. We have all the ingredients for a much better economy with all this cash. It is not being invested property."
"This is not a U.S. problem, it is a global problem. Whether it is China, Europe or the United States, this the problem we are all living with. We need leadership to guide us out of this, and until we have leadership and a better understanding of how Europe is going to play out their issues and, more importantly, how the United States and our Congress and our president is going to navigate our fiscal cliff.”
On whether November’s election will be a turning point for the economy:
“Our politicians are our guardians, no different from when we talk about the leaders and CEOs of different companies as guardians. Our politicians are guardians too, and they’re not acting in ways that guardians should. They should be addressing this fiscal cliff today. They should be addressing the sequester today to alleviate some of the uncertainty. If we had less uncertainty, we’d be investing more for tomorrow.”
On whether Europe should be a wake-up call to U.S. politicians:
“I would think Europe is a great wake-up call, and they are still snoring away.”
“There is always the probability that there is some form of failure. We're talking about a 19-country union, so we have many parts, and you have parts that are doing quite well economically and others that a doing very poorly. You have different issues. I think there is a low probability that it doesn’t ultimately work itself out. I think, unfortunately, to fix Europe, it could be an 8-more-years situation…We can muddle along. We've proven we can muddle along.”
“Greece cannot leave on its own. I never thought Greece would leave unless there was such aberrant behavior. Greek banking system is dependent on a lifeline with the ECB, so for any resolution with Greece and the ECB, it has to be a cooperative separation. The banks would have to have some type of line to the ECB to work that out. I don't see Greece as a situation, as a problem. The biggest problem is Spain, Italy. Can those economies find growth?”
On whether there should be more consumer involvement in the health care process:
“Well we have to fix health care. Health care costs are out of control. I think that’s a very good idea. As a co-chairman of NYU Medical Center, I’m pretty involved in health care. I think there is something to be said that consumers have to be aware of what it costs. I even think employees at BlackRock, with our programs, I’m not trying to suggest any misuse with my employees, but we need to be identifying to our employees what it all costs. I think throughout America health care is considered obviously an essential component of your life and a great safety net, but we misunderstand what it costs and so we as a nation misuse health care.”
On how to fix the problem of investors losing confidence in the markets and CEOs losing confidence in the economy:
“I think confidence is the key for a foundation of a strong market and strong economy. Politics plays such a large role now in our business that it’s taking away draining confidence…This lack of confidence of driving behavior to the short term.”
“I think it is totally fair, your discussion on the banks, and how they have let down their clients and their investors. Investors are speaking loudly, and these bank stocks are down 50, 60, 70, 80% from their highs of 2007. It’s having huge impact on their financial future.”
“We need leadership. We need leadership from a banker, from investment managers, from CEOs across the board working constructively with government to find a solution. I think it can be found again. I don't think we lost it…We’ve gone through these cycles of despair…I just try to remind everybody—this may be my age—the 1970s or for worse than what we are experiencing now. We had the failure of the presidency with Watergate, the failure of a war in Vietnam, hyperinflation, it took you an hour to get gasoline, double-digit inflation and you had high unemployment. It took 10, 15 years to work that out. And leaders like Paul Volcker, Ronald Reagan, Bill Clinton. We had a bunch of politicians who did the right thing. Built confidence and CEOs were able to do things with that. We are in a cycle where we have issues related to CEO banking behavior, issues related to the trust of Congress, issues related to Europe. We’ll get through this. This is why I am a believer, despite the negativity around confidence.”