The Securities and Exchange Commission’s (SEC) investigation into Goldman Sachs’ Abacus collateralised debt obligation (CDO) shows that investment bank practices have become too interrelated, and how the packaging of products can lead to conflicts of interest.
In-house counsel in the UK are worried that the deals their banks arrange are overlapping, leading to confusion over how they’re delivered and the contract terms that apply.“Banks used to create funds, over-the-counter products, and bonds on a very separate basis,” said one in-house counsel in London. “Now that you can deliver something in so many different ways you may get conflicts of interests arising on the same desk.”And how a product is packaged for investors will have an effect on how it is treated in contracts and by regulators.“If you...