Money managers affiliated with banks admitting they violated U.S. securities, banking and other laws could find it hard to get the necessary permission from regulators to continue running the more than $1.3 trillion they oversee.
“I am troubled to see yet another bank plead guilty to criminal charges, only to turn around and ask federal regulators to allow it to continue doing business as if it has done nothing wrong,” U.S. Rep. Maxine Waters, D-Calif., said in an e-mail. Ms. Waters is the ranking member of the House Financial Services Committee and a vocal critic of what she calls the “seemingly reflexive granting of waivers to bad actors.”
After being found guilty of criminal charges, financial firms routinely apply for exemptions from the Department of Labor to be allowed to keep managing retirement assets and file for waivers from the Securities and Exchange Commission to continue raising capital and managing money for investors.
While getting those waivers has been pro forma in the past, the wave of bank criminal cases is changing that.
In addition to guilty pleas for rigging foreign currency exchange rates already reached against Deutsche Bank AG, Credit Suisse Group AG and BNP Paribas, separate settlement agreements are reportedly being negotiated with Citigroup Inc., Barclays PLC, J.P. Morgan Chase & Co. and Royal Bank of Scotland Group. UBS Group AG faces a similar fate.
“Now you've got all these high-profile criminal cases, and these financial institutions could have some real problems,” said Thomas Gorman, a former SEC enforcement official and a partner at international law firm Dorsey & Whitney LLP in Washington. “If you (a bank that also manages money) have problems with the Investment Advisers Act (of 1940, which regulates money managers) ... those are the ones that could really put you out of business.”Pressure is building at the SEC to make waivers harder to get. Two of the most vocal waiver critics are Commissioners Kara Stein and Luis Aguilar.