Takeaways for BGR MBA Class of 2015

BGR - Session 7
A Rogue Trader at Daiwa Bank (A): Management Responsibility under different Jurisprudential
systems, practices, and cultures
(The cross-jurisdictional legal and regulatory implications of rogue trading activity in a branch of a
foreign bank)
Case:

1. It is important to meticulously observe and comply with the legal and regulatory requirements
of the jurisdiction in which business is being conducted. When operating in different
jurisdictions, the law of each jurisdiction would have supremacy with respect to the operation
within its borders. Compliance as per regulatory practice of the home jurisdiction would be
of no avail vis-i-vis compliance requirements of the field jurisdiction (i.e. where the
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operation is located).
In the case of financial institutions, it is natural for the regulator of the field jurisdiction to
rely upon, at least to a limited extent, on supervision and monitoring by the regulator of the
home jurisdiction. Obviously, this would not be possible if the latter home jurisdiction

3.

regulator lacks efficacy and does not provide adequate supervision.

In fact, many jurisdictions claim and enforce extra-territoriality i.e. extend their enforcement
reach beyond their borders, which, on occasion, comes into clash with the regulators into

4.

whose domain the enforcement imperative has been extended.

Unless resolved differently through judicial precedent, any additional requirements imposed by
a statute beyond those of another statute must be complied with - the universally accepted
principle is to harmonize and conform with all laws. If, however, the laws are in conflict,
established principles to deal with such conflict that are applicable in the jurisdiction
concerned must be followed e.g. in most jurisdictions, the most recent law prevails over the
earlier law and a specific law over a general law.

5.

While it is important to maintain a close and respectful relationship with all regulators,
in particular the primary home jurisdiction regulator, requests or directives of any regulator
that necessitate violation of a law/laws need to be firmly and politely resisted/declined.
Whatever be the prevailing practice or cultural ethos regarding obedience to the regulator, it
has to be a rather obtuse regulator that will continue to insist upon a violation of law and hold
it against the resisting party.

6.

Unless it can be conclusively shown otherwise, directors are ordinarily presumed to act in good
faith, on an informed basis, in the honest belief that their decisions are in the companys best
interests and without involving self interest (i.e. the US Business Judgment Rule). To
protect themselves, directors must insist on complete compliance withall laws and regulations
--- in this respect a board director must be always vigilant and must also unequivocally
repudiate as well as distance himself from any action or decision that is, in any way
whatsoever, violative of the law/regulations (or that can be deemed to be such).

BGR MBA Class of 2015 (Semester IIIB Nov 5 Dec 27, 2014)