More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- 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.
Barclays has been a cautionary lesson for other banks involved in the LIBOR-rigging scandal. Outrage over the bank’s involvement in manipulation of the interbank rate that claimed its top three officers in addition to exacting a heavy financial toll has led to other banks involved in the scheme to seek a group settlement rather than expose themselves individually to regulatory and public fury.
Reuters reported Friday that unidentified sources cited preliminary discussions with regulators by banks in an effort to avoid the spotlight cast on the first bank to come to terms with regulators. Those familiar with the banks’ reasoning said that while it is not yet known if regulators will allow such an arrangement, the banks want to avoid the backlash from politicians and from people in general that assailed Barclays for its role in the scandal.
A group settlement had been discussed before Barclays reached its agreement with regulators, and now such talks have been resumed in the wake of the furor. While many banks are involved in the investigation, it is not known which are engaged in group settlement talks.
One unidentified banker said in the report that a group settlement would appeal to regulators because of the headlines it would produce and the magnitude of the potential settlement figure. The report cited the $25 billion settlement reached by five U.S. banks and American regulators over the mortgage meltdown.
However, the banker conceded that the banks were having a hard time working together, with considerable bargaining and jockeying for position taking place that could complicate any possibility of a settlement.
Another source at one of the involved institutions said that further complications were the fact that different groups of regulators were involved with different banks, and that charges were different in each instance. Such difficulties lowered the odds of reaching a successful agreement, the source said.
Still, the possibility of avoiding the vortex of publicity that overwhelmed Barclays is a powerful incentive, particularly since, although in financial terms Barclays was granted a 30% “discount” in its settlement, it paid far more in lost reputation and leadership.
According to analyst estimates, the banks could be on the hook for $20 billion to $40 billion. Added to the increased regulatory scrutiny they already face, the cost of their participation in the scheme will be great.
Much of the public outrage was spurred by the release of numerous e-mails showing the blithe attitude of those involved, with offers flying between banks of coffee and champagne in exchange for rate adjustments to specifications. Some of the manipulations boosted bank profits and others masked their financial health.
Regulators, too, are unlikely to emerge from the ordeal unscathed, since allegations have surfaced that some—from the Bank of England (BoE) to the New York Fed—knew of the manipulations for years.
Regulators across the globe have already undertaken investigations of regional interbank lending rate setting, and discussions are planned on whether to replace LIBOR altogether. The rate influences the prices of some $550 trillion in financial products, from mortgages and consumer loans to corporate paper and bonds.