Investment Banking Firms Should be Unlimited Liability Partnerships

Pinnacle Digest writes: How well do you think the governments of the western world are regulating the financial services industry? We all know the risk JP Morgan took on and now we know the losses incurred. Why did this happen given that regulators have stepped up efforts to reduce the systemic risk in the industry?

The answer may lie in this article (linked below) written by Paul Tustain, Founder and CEO of Bullionvault.com.

Paul explains his direct knowledge of what unlimited liability partnerships do to the psyche of partners running financial firms. He mentions that his father was an investment banker at one time. When his father ran a financial company, it was structured as an unlimited liability partnership. This type of company created a culture of diligence, risk management and attention to detail as all partners knew they were on the hook legally if anything went sideways. He makes some very strong points as to why this way of structuring a company is far superior in mitigating risk than the creation of thousands of papers and rules these massive banks are suppose to follow.

In this day and age, if banks don’t follow the bureaucratic rules and end up in financial trouble, one individual at the firm is usually thrown under the bus and the rest of the company might be bailed out by the tax payer. We have a flawed system with miles of regulation and red tape, yet the very problems these regulations were suppose to stop continue to grow. The unlimited liability partnership was in existence for 150 years in this industry for a good reason.

Click here to read the full article by Paul Tustain.