Investment and marketing: answering the questions

Investment and marketing: answering the questions Essay example
Finance & Accounting
Pages 11 (2761 words)
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Questions Part A (50 per cent of the marks) (1000 words) 1a. Using Extract 1 by Linda Whitney and the study materials, briefly outline three regulatory challenges that might arise from the employment of sales staff in the financial services industry. (12 marks) One of the major concerns for independent regulation of the financial services industry relates to the structure of large investment banks, where multiple divisions within the same company structure may have interests with clients that compete or conflict with each other.


Many large clients seek the services of an investment bank precisely for this reason, as the collective knowledge base of the financial sales experts in the group should allow the client to gain a preferential entry and exit point for market trades. However, financial sales staff can also abuse this inside knowledge, as for example, Goldman Sachs did in creating the Abacus tranche of mortgage bonds for hedge fund trader John Paulson which were designed to fail, but sold to pension funds, private investors, municipalities, and other investment banks as legitimate long-term investments while simultaneously being shorted by Paulson’s hedge fund. ...
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